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Gold to average above $1,550 in 2020; silver above $18 -- LBMA survey

Kitco News

(Kitco News) - The average prices of the four main precious metals in 2020 are all expected to post double-digit gains over the actual average for 2019, although most of these forecasts are fairly flat compared to where prices were early in the year, according to a survey of analysts by the London Bullion Market Association (LBMA) released Monday.

The average price forecast for gold in 2020 was $1,558.80 an ounce, which is 11.9% higher than the $1,392.60 actual average in 2019 but only modestly above the $1,554.20-per-ounce average for the first half of January.

Silver is seen averaging $18.21 in 2020, which is 12.4% above the 2019 actual average of $16.20. The metal averaged $18.08 an ounce in the first two weeks of January.

The LBMA also tabulated what analysts expect to be the top drivers for gold prices in 2020. Thirty-eight percent said geopolitical and economic tensions, such as U.S. elections, Brexit and the ongoing trade war. Another 35% said monetary policy, particularly in the U.S., which in turn affects the strength of the U.S. dollar. Fifteen percent of respondents listed “changes in demand,” especially in the top two gold-consuming nations of India and China.

Rene Hochreiter of Noah Capital Markets/Sieberana Research Pty Ltd. and Rhona O’Connell of INTL FCStone were the winners of the LBMA’s annual gold-forecasting contest for 2019. For the current year, Hochreiter listed an average forecast of $1,670 an ounce, while O’Connell listed  $1,590.

“Iran could be the spark that ignites the gold price, but then numerous factors could equally do the trick,” according to comments attributed to Hochreiter in the LBMA report. “It is now 10 years since the gold price hit $2,000/oz on intra-day trading and the likelihood of a run this year is quite high. Technically, gold broke through resistance at around $1,320/oz in June 2019 and is now in ‘full bull’ mode, trading a respectable $130/oz above its 200 DMA [200-day moving average]. This could continue for some considerable time, perhaps most of 2020.”

The LBMA report has O’Connell listing both bearish and bullish influences for gold. On the bearish side, the analyst cited less official-sector buying although still a historically high level, a large “overhang” in bullish futures positioning that means potential selling whenever these traders finally exit, and reduced economic worries if the U.S. and China resolve their trade issues.

On the bullish side, O’Connell cited negative European interest rates, geopolitical risk “that has not gone away,” and a lack of buying from retail investors that could mean “a very substantial degree of pent-up demand waiting to be unleashed once retailers finally get used to higher prices, which is taking a lot longer than usual.”

O’Connell concluded: “The key driver is likely to be the performance of the dollar tied in with risk assessment and this points to a gradually rising price.”

Independent analyst Ross Norman (winner for palladium in the 2019 survey) is the most bullish gold analyst for 2020 with his average call of $1,755 an ounce, while Bernard Dahdah (last year’s winner for silver and platinum) has the lowest annual average gold forecast at $1,398.

Analysts collectively called for platinum to average $1,005.10 an ounce this year, a 16.5% gain from the 2019 actual tally of $862.90. This metal averaged $973.60 during the first two weeks of the new year.

Palladium – the high flyer in 2019 – was seen averaging $2,116 in 2020, which would be a gain of 37.7% above last year’s actual average of $1,536.70. The average for the first two weeks of January was $2,065.20.

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