Gold Price Forecast: 2015, 2016 price forecasts

Gold Price Forecast

HSBC strategists on Monday lowered their average annual gold price forecasts for this year and the next one, warning that gold prices are likely to remain under pressure in the short term and may “move within striking distance of $1,000” an ounce before recovering. HSBC lowered its 2015 average annual price forecast to $1,160 from $1,234 and for 2016 to $1,205 from $1,275.

Gold prices may need to fall another 30 per cent to reach fair value, according to Deutsche Bank, with cheap oil the only potential lifeline for the battered precious metal. Gold is currently trading around $US1096, just above last week’s fresh five-year low of $US1072.30.

Gold Price Forecast

Deutsche tested the gold price through  several models to determine “fair value” for the precious metal; the Deutsche “gold price model”, which factors in world growth, the US dollar, money supply and central bank gold purchases, calculated fair value at $US785 per ounce. But the long-run average price in real terms – using the Consumer Price Index – was $US770.  Using the Producer Price Index, the long-run average price was $US725.

Deutsche also added that a falling oil price is the one caveat to this bearish forecast. The reason is that cheap oil reduces inflationary pressure in the US, eases the need for the Federal Reserve to raise interest rates and puts downward pressure on gold’s main competitor, the US dollar.

Deutsche’s bearish prediction for bullion is shared by some analysts – ABN Amro say bullion will be at $800 by 2016. Capital Economics, for example, tip gold to be at $US1050 at the end of the third quarter and $US1200 at the end of 2015, rising higher in the years after that. Moreover the World Bank tips gold will fall but only gradually, reaching $US1000 in 2025.

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