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Credit Suiise hikes gold-price forecasts, sees $1,701 average for 2020

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(Kitco News) - Credit Suiise hiked its gold-price forecasts Friday, saying that supportive influences include lower and negative yields, weakness in the U.S. dollar and eventual inflationary pressures.

Further, Credit Suiise said higher prices add to an improved financial picture for gold producers, which should attract capital flows from “generalist” investors. The expectation for higher prices also led analysts to up their forecasts for target stock prices of the mining companies that they cover.

The bank now looks for gold to average $1,700 an ounce in the second quarter (versus $1,540 previously), then rise to an average of $1,750 in the third quarter ($1,560 previously) and an average of $1,775 in the fourth ($1,600 previously).

Credit Suisse looks for gold to average $1,701 for the full year, up from $1,570 previously. The outlook for 2021 was upped to $1,800 from $1,600. Gold is then seen easing back to $1,650 in 2022, compared to the previous forecast of $1,550 an ounce.

“We continue to see meaningful potential upside in the sector, predicated on higher gold prices and a re-rating closer to multiples seen in the last major gold rally in 2011-12, particularly for mid-cap/intermediate producers,” Credit Suiise said. “We expect that higher gold prices, coupled with a renewed sector focus on margins, FCF [free cash flow], and return of capital to shareholders, will continue to attract generalist capital.”

Analysts said the investors they speak to, increasingly generalists, are upbeat on gold. Conversations tend to center around topics such as sector positioning; whether to focus on producers, royalty companies or exchange-traded funds; remaining potential upside in share prices given the strong performance of gold equities already this year; and near-term operational headwinds and tailwinds for companies.

Analysts also said both they and investors anticipate more mergers and acquisitions in the gold-mining sector, adding that “no-premium deals have become the gold standard.”

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