Capital Economics Trims Year-End Gold Forecast, But Remains Positive

By  Paul Ploumis 07 Jul 2015  Last updated at  04:03:59 GMT

(Kitco News) - Capital Economics has trimmed its year-end forecasts for gold and other precious metals, although the firm said it remains “positive” on the yellow metal, looking for prices to rise from current levels.

 

The firm said it trimmed its outlook since prices of metals have not responded as anticipated so far to the risk of Greece exiting European monetary union.

 

“In short, the Greek rejection of the proposed bailout terms in this weekend’s referendum surely takes the country a step closer to the exit,” Capital Economics says. “Nonetheless, the response in most financial markets, including precious metals, has been fairly muted. Indeed, it appears that investors either believe that ‘Grexit’ can still be avoided, or that, if it does occur, the contagion will be limited.

 

“As a result, the price of gold has merely been treading water, failing to benefit from safe-haven demand as we had expected.”

 

Given this and expectation that the U.S. Federal Reserve will hike interest rates, Capital Economics lowered its end-of-2015 forecast for gold from $1,400 per ounce to $1,275.

 

“However, we remain positive on the gold price in the medium term and expect it to reach $1,400 by end-2016, underpinned by strong demand from China and India and from the official sector,” Capital Economics said.

 

The firm said it now expects the silver price to reach $18.70 per ounce by end of 2015, down from a forecast of $21 previously, but still targets an end-of-2016 price of $21. Capital Economics revised down its end-of-2015 forecast for platinum to $1,200 from $1,300 previously, and for palladium to $820 from $900.

 

“Looking forward, though, we expect the prices of platinum and palladium to reach $1,400 and $950, respectively, by end-year 2016,” the firm said. “Overall, we anticipate precious metal prices to recover in 2016, once investors return to focus on the strong fundamentals.”

 

Courtesy: Kitco News