'Soggy' Fundamentals Will Keep A Lid On Gold Prices - Macquarie
(Kitco News)- The gold market could struggle through the rest of the year asthere is a lack of fundamental reasons to push prices higher, according to oneAustralian Bank.
It is difficult to be overly bullish on gold as there is no newcatalyst that could dramatically drive prices higher, Macquarie precious metals analyst MatthewTurner told Kitco News on the sidelines of the London Bullion MarketAssociation’s 2018 precious metalsconference.
Turner explained gold embarked on a major rally in the early2000s because of major shifts in demand. “Central banks started buying goldafter being net sellers, investors were buying investment gold through newlylaunched exchange traded products, and the Chinese started to build its goldexchange,” he said.
“These were three major factors that fundamentally increaseddemand for gold,” he said. “Right now, we see the supply demand outlook as alittle bit soggy. We just don’t know where the next big catalyst for gold isgoing to come from,” he said.
Turner added that his firm thinks that investment demand couldcontinue to drive prices to around $1,300 an ounce, but the market will beunable to find any solid momentum in the current environment.
The comments come as gold failed to find new momentum to push itabove its recent three-month highs. December gold futures last traded at$1,229.50 an ounce, down 0.24% on the day.
In its latest forecasts, Macquarie sees gold prices averaging theyear at $1,271 an ounce, down 0.4% from its previous forecast. In 2019, thebank sees prices averaging $1,219 an ounce, down 10% from its previousestimate.
“Our concern increasingly is about [gold’s] ‘fundamentals,’ which are oftenoverlooked but we think are tending towards market surpluses, meaning investorflows have to work even harder to push prices higher,” the bank said in arecent report.
The Australian bank is only slightly more optimistic on silver,which they admit failed spectacularly in 2018. Although the bank hassignificantly lowered its silver estimates for 2018 through to 2022, they notethat the metal is a better value compared to other assets.
“Silver was our top pick of the precious metals for 2018. Sonaturally, it has been the worst performer,” the analysts said in their report.“With precious metals though, there is always someone willing to hold them atthe right price. Silver clearly now has one thing in its favor -- it’s prettycheap, both relatively and historically.”
Macquarie sees silver prices averaging the year at $15.85 anounce, down 9% from the previous estimate. For next year, the bank expectssilver to average the year at $15.81 an ounce, a 19% drop from its previousforecast.
December silver futures last traded at $14.545 anounce, down 0.70% on the day.
By Neils ChristensenFor Kitco News
Follow neils_C
nchristensen@kitco.comwww.kitco.com Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.