Credit Suisse Sees $1,500/Oz Gold By Early 2017

By Kitco News

Thursday June 30, 2016 10:20

(Kitco News) - Credit Suisse is forecasting that gold will hit $1,500 an ounce by the early part of next year on prolonged macroeconomic uncertainty.

The bank said gold, up sharply so far this year, already hit its prior forecast after the U.K. vote last week to leave the European Union. Back in April, Credit Suisse had expected gold to hit $1,350 an ounce by the first quarter of 2017.

“The common argument we hear from gold participants is that gold is currently benefitting from a fear trade on Brexit, and that may indeed be the case,” Credit Suisse said in a report late Wednesday. “But we think this recent fear trade leads to something more enduring as the surprise Brexit vote has solidified and intensified macro and political uncertainty and extended the time frame for a negative real rate environment in the U.S. and potentially abroad.”

Now, the bank sees gold averaging $1,475 in the fourth quarter and $1,500 in the first quarter of next year. Still other supportive influences include continued central-bank diversification into gold and uncertainty ahead of the November presidential election. Credit Suisse forecast gold supply deficits for this year and next, projecting increased demand from exchange-traded funds and hoarding of bars and coins.

“Meanwhile, we continue to expect mine supply to decline over the next three years,” Credit Suiise said.

Credit Suiise also upped its silver forecast to $19.50 an ounce by the fourth quarter. The bank listed a “long-term” outlook of $20, with the gold/silver ratio returning to 65 to 1.

“Silver market deficits drive our higher price forecast as we see increased ETF demand and lower our

expectation for mine supply,” the bank said.

Credit Suiise looks for a physical silver supply deficit of 114 million ounces this year and 55 million next year, before returning to balance in 2019. Mine supply is expected to be flat in 2016.

By Allen Sykora of Kitco News; asykora@kitco.com

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