By Paul Ploumis (ScrapMonster Author)
March 31, 2016 02:08:21 AM
(Kitco News) - The gold price is looking a little top-heavy for New York-based research firm CPM Group, which on the day of its Gold Yearbook launch, says it expects the yellow metal to stay above $1,130 an ounce in 2016.
“The gold price rose for a variety of reasons – one of which was that you had a lot of investors concerned about recessionary economic conditions in the U.S. and China, and investors are now starting to back away from that,’ explained the firm’s managing director and well-known market commentator, Jeffrey Christian.
Speaking ahead of the firm’s coveted Gold Yearbook launch, which examines fundamental trends in the market for the year, Christian said that if the metal manages to stay above $1,170-$1,180 an ounce, it would be “incredibly bullish.”
“We think the gold price could fall back to $1,130 and that would not be unreasonable to us,” he explained. The yellow metal is currently up 15.5% since the start of the year, but down after hitting a 13-month high earlier this month. On Tuesday, April gold found some momentum settling the day at $1,235.80 an ounce, up more than 1%, or $15.7 ounce.
“As investors back away from fears of recession, you will see hesitance in buying more gold and you might see shorter-term investors liquidate some of their positions,” Christian said. He explained that investors are coming to the realization that recessionary conditions will probably not come to fruition, but it will be an environment of relatively modest growth. “The stock market has probably topped out but it probably is not going to collapse either,” he said.
Going forward, investment demand is forecast to grow setting up investors to compete with central banks for gold, which should influence prices positively, CPM said.
He added, “Our expectation is that the gold price comes down over the next two quarters – second and third and by the end of year, [it] starts rising again as investor concerns of the economic outlook for 2017 starts to take hold again.”
In late 2010, CPM had previously forecasted that gold and commodity prices might reach ‘a cyclical peak in a secular bull market,’ possibly around 2011, and then decline for three to five years before resuming their upward moves. Gold and commodities prices have been declining for more than four years now, since late 2011, and the firm’s 2016 yearbook suggested that this is, “the most valid approach to future gold price trends.”
Christian added that one gold market fundamental that has been gaining importance as a positive influence on gold prices in recent years is central bank gold demand.
“The big surprise development in 2015 was the announcement by the People’s Bank of China (PBOC) in July,” he said. It was an especially important period with regard to demand from this sector, he explained.
The PBOC signaled that it had changed its attitude toward gold as a monetary reserve asset. “It announced that it had added 19.4 million ounces of gold to its holdings in June and that it would continue to buy gold and add it to its monetary reserves as it buys it, which it has been doing since July 2015,” CPM explained.
Christian said that the firm expects the PBOC to be a more active and regular gold buyer in 2016, rather than the episodic purchase they made from 2003 to 2014.
Courtesy: Kitco News
