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