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Gold, Silver Investors: Strap In; It's Going To Be A Bumpy Ride - LBMA 2019 Price Forecast

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(Kitco News) - Gold investors should fasten their seatbelts because 2019 could be a volatile year for the precious metal as there is no clear consensus on prices among commodity analysts who provided a forecast to the London Bullion Market Association (LBMA).

In a 2019 precious-metals price forecast published Wednesday, the LBMA said that the average gold price prediction from commodity analysts is $1,311.71 an ounce. Analysts collectively look for silver to average $16.28 an ounce, platinum to average $850.71 and palladium to average $1,267.68.

However, looking beyond the headline number, the price range among analyst predictions sees gold swinging within a $325 channel, with the highest price estimate coming in at $1,475 and the lowest forecast at $1,150 an ounce.

Individual silver estimates are seen trading in a $7.25 range, with analysts’ estimates calling for a high at $20 an ounce and a low at $12.75 an ounce.

Analysts’ estimates show platinum within a $430 range with the high coming in at $1,050 an ounce with a low at $620 an ounce. Meanwhile palladium is expected to swing within an $815 range, with the high coming in at $1,715 an ounce and the low at $900.

Gold: Who Is The Most Bullish?

Although the average headline number shows a modest 3% increase from the 2018 average of $1,268 an ounce, sentiment appears to be fairly bullish, with many investors seeing gold prices push above $1,400 an ounce this year.

The most bullish analyst in the LBMA survey is Eddie Nagao at Sumitomo Corp. In his forecast, he said that prices could rise as high as $1,475 an ounce this year, with prices averaging $1,315.

“The probability of a U.S. recession is higher now and volatility of the markets is expected to rise as there will be fewer risk underwriters under such circumstance,” he said. “Gold is to be one of the favored asset classes among institutional and private investors.”

Réne Hochreiter, at Noah Capital Markets, is also fairly bullish on gold with the highest average price for 2019. He sees gold prices hitting $1,420 an ounce and averaging $1,365.

“With the VIX at extreme levels, and a full-blast bear market possible this year on the U.S. exchanges, the gold price is finally beginning to show signs of bullishness,” he said.

On The Bearish Side

Peter Fertig, at QCR Quantitative Commodity Research Ltd,  is the most negative on gold as he sees the low coming in at $1,150 an ounce. Fertig sees gold prices averaging $1,250 an ounce.

“Gold ended last year in the red for the third consecutive time and 2019 could easily be the fourth one, despite the trading range being expected to be almost the same,” he said. “The low U.S. unemployment rate and accelerated wage growth could induce the Fed to make two more rate hikes as scheduled. In that case, a stronger U.S. dollar has to be expected, which would be negative for gold.”

Adam Williams, from Fastmarkets, has the lowest average price for gold at $1,242 an ounce.

“Gold was a bolthole for investors in the second half of 2018, but a return to more concerted growth should mean that prices will start to drift lower again in 2019, especially if the Fed’s more dovish stance proves short-lived,” he said.

Silver: Who Is The Most Bullish?

Compared to gold, there is a less overall optimism within the silver market. Hans-Günter Ritter of Heraeus is the most bullish on silver as he sees prices pushing to $20 an ounce and averaging $17.

“There are plenty of reasons for investors to look for a store of value in less certain times and silver could benefit alongside gold,” he said.

Rhona O’Connell, an independent analyst, has the highest average silver price at $17.55 an ounce.

“Silver remains torn between deciding whether it is an industrial or a precious metal,” she said. “The industrial fundamentals remain unprepossessing and gold is likely to be the key driver this year. On that basis, and given that the vast majority of silver’s fundamentals are price-inelastic, a narrowing of the gold:silver ratio is foreseeable, although it is not likely to be by much.”

The Bearish Side

Fertig also has the most bearish view on silver as he sees a low at $12.75, with prices averaging $14.90 an ounce for the year.

“At the end of last year, silver profited from the rout in equity market. However, this is probably only a flash in the pan,” he said. “While we would not rule out that silver might rise above $16/oz temporarily, a sustained upward trend and trading above last year’s high appears rather unlikely.”

Winners Of 2018 Forecasts

With gold prices averaging the year at $1,268.41 an ounce, Aakash Doshi from Citigroup was the top forecaster last year for his call of $1,270 an ounce, less than $2 from the average price.

Robin Bhar had the best silver prediction last year, when he called for an average price of $16 an ounce, compared to the average $15.71.

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.