Gold and Silver Have The Best Potential Of All Commodities In '18 - Macquarie
(Kitco News)- Although the precious metals market continues to struggleto find new momentum, one international bank sees potential for the next threeyears.
In a recent research report, commodity analysts atMacquarie said they think the precious metals sector is the best bet within thebroad-commodity sector. The bank said that it sees higher gold prices throughto 2020 because of growing inflation pressures and a weaker U.S. dollar due to increasingdeficits.
In its official forecast, the firm sees gold averaging $1,356 an ounce this year, $1,375 an ounce in 2019 and averaging $1,400 anounce in 2020. The analysts see potential for gold prices to push above $1,400an ounce this year.
Macquarie analysts are bullish on gold as they see furtherweakness in the U.S. dollar. They note that a weaker greenback is helping theyellow metal fight against rising real interest rates.
“Our global economics team sees at least another 10%downside for the US currency, and more likely 15%. This might be expected topush gold up 15%, say $1,500/oz,’ the analysts said in the report. “But at thesame time, they expect US yields to rise towards 4%, and as inflation will onlyhead to 2.6%, this means another leg-higher for real yields. If we plug thisinto a “model” of their historical relationship, it suggests gold’s price willgo higher, but only to around $1,400/oz.”
While gold has potential to move higher this year, theanalysts said that the market is close to fair value; June gold futures lasttraded at $1,336.40 an ounce, relatively flat on the day and up more than 2%since the start of the year.
Macquarie added that something extra -- more thansafe-haven demand from rising geopolitical uncertainty -- is needed to pushprices above $1,400 an ounce.
“We still think political risk offers some upside, thoughit is hard to quantify this,” they said. “To see a real shift into gold, wemight need to wait for a resurgence in inflation, no longer just a black swanevent. But we’d think that this is more likely a 2019 story.”
Macquarie is even more bullish on silver prices. The bank seesthe silver averaging this year at $18.25 an ounce, $20.63 an ounce in 2019 and$21 in 2020. May silver futures last traded at $16.43 an ounce, up 0.42% on theday but down 3.6% since the start of the year.
The bank noted that silver has lagged gold because oflackluster investor demand. The comments come as speculative bearish interestin the white metal rise to record highs. The market has suffered in partbecause of soaring equity markets and crypto-currencies, the analysts said.They added that these factors should start to fade as volatility picks up.
“So should we abandon our bull call? Not yet.Things haven’t played out as expected, but we’ve not seen anythingfundamentally to change our view they will,” the analysts said. “Our macro viewis for a lower dollar and accelerating industry (note specific silver demandmeasures, such as imports, remain robust), while investor demand soon will onlyhave one way to go.”
By Neils ChristensenFor Kitco News
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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.