Ignore 2018, Get Ready For A Gold Rally In 2019 - ABN Amro
The Dutch bank projects gold to fall to $1,250-$1,200 per ounce next year amid significant downward pressures.
“We no longer expect gold prices to rally in 2018,” said Georgette Boele, ABN Amro’s senior precious metals & diamond analyst, pointing to the change in the U.S. dollar’s forecast.
“It is unlikely that the U.S. dollar will be aggressively sold off in 2018 for reasons ranging from higher US nominal yields, upside momentum in the US economy and two more 25bp rate hikes in 2018 by the Fed (one is priced in). In fact, we expect a modest recovery in the dollar,” Boele said.
Ten-year U.S. real yields is another negative factor for gold. “In 2017, the 10-year U.S. real yields ranged from 0.2% to 0.7% and it was at the time of writing around 0.45%. For 2018, our U.S. economist expects 10-year U.S. real yields to stay close to the current level.”
On top of that, central banks around the world are starting to tighten their monetary policies, which is bound to drag the yellow metal’s prices down. “This is a negative for zero-income assets such as gold,” said Boele.
Despite the current setback, 2017 has been a positive year for gold, with prices rising around 11% year-to-date. February Comex gold was last at $1,268.8, up 0.31% on the day, after falling to four-month lows during the North American trading session on Tuesday.
ABN Amro also said that a decline in 2018 could give a unique opportunity for a rally in 2019.
“For 2019, we expect U.S. dollar weakness to return as drivers for the U.S. dollar will become less favorable. All in all, we think that gold prices can rally towards $1,400 per ounce in 2019,” Boele pointed out.
Meanwhile, silver prices are likely to encounter a similar fate to gold in 2018 and 2019, according to ABN Amro.
“Silver price weakness will probably run towards $16 per ounce. If investors were to square a substantial amount of net-long silver positions, prices could drop towards $15.0 to $15.5 area. This would be an opportunity to position for a recovery in silver prices in 2019,” Boele added.
March Comex silver was last at $16.130, up 0.39% on the day.