TD Securities Looks For Gold/Silver Ratio To First Rise, Then Reverse In 2015

(Kitco News) - TD Securities looks for gold to hold up better than silver in the early part of 2015 when both metals come under pressure, but then for silver to outperform in the latter part of next year when both bounce again.

“The precious metals market is likely to strengthen materially in the latter part of 2015, but there will be considerable weakness into the next quarter or so,” TDS says.

“Typically, a weak precious metals market implies silver underperformance due to its significantly higher volatility and its strong links to industrial activity. Conversely, recovering precious metals markets suggest that gold will recover less robustly relative to silver.”

For now, expectations for Federal Reserve rate hikes next year are likely to pressure the metals, TDS says.

Further, the U.S. dollar may rise further as the European Central Bank undertakes asset purchases.

However, TDS doubts the Fed will be “too restrictive,” implying real rates should not increase much.

“If inflation moves higher along with a reduction in the U.S. output gap in H1 2015, the cost of carry for gold and silver may not rise as much as many real money traders and specs think,” TDS says.

“This should bring investors into gold and silver again, with silver outperforming due to volatility and the expected increase in industrial restocking and demand.”

TDS sees gold averaging $1,200 in the first quarter of 2015 but rising to $1,275 in the fourth. Silver is seen averaging $17 in the first quarter but rising to $19.50 in the fourth.

Courtesy: Kitco News