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Gold prices to Hold $1,600 through 2021 - CIBC

Kitco News

(Kitco News) - Gold’s resilience heading into a relatively positive seasonal period should push prices back through critical resistance by the end of the year and prices should be well supported around $1,600 an ounce for the next two years, according to one Canadian bank.

In a report Wednesday, analysts at CIBC tweaked their gold and silver forecast for the fourth quarter and through 2021.

“The signs of a favorable environment for the commodity emerged late last year and have continued to build throughout 2019. Our original thesis is now playing out; we continue to see slowing global growth, a more dovish Fed and real rates below 2% driving demand for the commodity and causing a decoupling in the negative relationship between gold and the U.S. dollar,” the analysts said.

Looking at gold prices, CIBC sees the yellow metal averaging $1,500 in the fourth quarter of this year, up from the previous estimate of $1,425 an ounce. Looking ahead the analysts said that they see prices hovering around $1,600 next year and in 2021, up from the previous forecast of $1,500.

The bank is maintaining its long-term forecast of $1,400 an ounce.

Looking at silver, the bank sees prices pushing to $18 an ounce in the fourth quarter, up from the previous forecast of $16.25. Long term, the bank sees prices holding around $19 for the next two years, up from the previous forecast of $16.50 and $17 respectively.

“We continue to see no signs of rate hikes on the horizon for the next several years, and instead expect one additional rate cut in the U.S. before year-end, with potential for further rate cuts in 2020,” the analysts said. “In past cycles, gold has continued on an upward trajectory well beyond the last rate cut, and we see no reason to believe that this time will be any different.”

The comments come as gold has benefited from new safe-haven flows. It hasn’t taken much to push investors back into gold; the latest move was triggered after disappointing retail sales numbers for September.

According to some analysts, the disappointing economic data continues to support market expectations that the Federal Reserve will cut interest rates at the end of the month.

In the positive gold environment, CIBC reiterated their top picks in the mining sector: Agnico Eagle Mines (NYSE: AEM, TSX: AEM) B2Gold (NYSE: BTG, TSX: BTO), Equinox Gold (NYSE: EQX), Franco Nevada (TSX: FNV) , Kirkland Lake (NYSE: KL, TSX: KL) and SSRM (Nasdaq: SSRM, TSX: SSRM).

The analysts note that impending positive third quarter earnings could drive further investor interest into these mining stocks.

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