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Gold To Only 'Fall Back' From Here In 2018 - Capital Economics

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Gold To Only ‘Fall Back’ From Here In 2018 — Capital Economics

(Kitco News) - Gold prices will fall as markets head into 2018 amid a more aggressive Federal Reserve and U.S. President Donald Trump’s tax reforms, Capital Economics said in a report.

The yellow metal suffered substantial losses during the North American trading session on Wednesday, after it failed to successfully breach the key psychological level of $1,300 the day before.

February Comex gold was last at $1,287.30, up 0.09% on the day after “chart-based selling pressure from the shorter-term futures traders” triggered pre-placed sell stop orders, said Kitco’s senior technical analyst Jim Wyckoff.

By Q4 next year, Capital Economics estimates gold will only be trading around $1,200 an ounce, which is a fairly bearish outlook considering where prices are now.

The main obstacles for gold next year will be a more aggressive Fed, which will be encouraged to tighten more than expected due to successful passage of tax reforms, according to Capital Economics.

“Fed tightening will prove too strong a headwind, particularly for gold and silver,” the report said. “Indeed, it now looks increasingly likely that the U.S. Congress will pass a tax bill by early next year. This should give a boost to GDP growth and inflation in 2018, which, in turn, will force the Fed to raise interest rates more aggressively than markets currently anticipate and cause a small appreciation in the U.S. dollar.”

Yet, Capital Economics pointed to geopolitics as a major factor in supporting the precious metals in 2018.

“Strong safe-haven demand on the back of heightened geopolitical risks will continue to give some support to gold (and silver). But we think that prices will still fall back a bit from current levels.”

The picture starts to look much brighter for gold in 2019, Capital Economics pointed out, projecting for prices to go up to $1,280 during the first half of the year.

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.