A slowing global economy, stock market turmoil, delays to interest rate rises and potential U.S. dollar weakness are expected to boost average annual gold prices to their highest since 2013, a Reuters poll found.
Gold will average $1,322 an ounce this year and $1,369 in 2020, the median forecasts returned by the poll of 34 analysts and traders showed.
The forecasts were higher than those from a similar poll three months ago which saw averages of $1,305 this year and $1,350 in 2020.
Gold prices have slipped in recent weeks to around $1,280, under pressure from a stronger dollar, which makes bullion more expensive for buyers with other currencies, and rising stock markets which offered investors better returns.
Helping push gold lower, some investors have taken money out of gold-backed exchange-traded funds and speculators ramped up bets on lower prices on the Comex exchange, which now outnumber wagers on higher prices.
But analysts said slowing global economic growth, the increasing likelihood of stock market corrections, a pause in interest rate rises and a likely weakening of the dollar would bring money back to the metal.
Gold is traditionally seen as a safe place to invest during times of uncertainty, as it tends to retain its value while other assets slide.
“We expect falling risk appetite and a surge in safe-haven demand to be the key factor driving both gold and silver prices,” said Capital Economics analyst Ross Strachan.
Higher interest rates are bad for gold because they raise bond yields, making non-yielding bullion less attractive to investors.
A Reuters poll of 70 currency strategists showed they expected the U.S. dollar, which in April reached its strongest in almost two years, to slip over the coming year.
The gold forecast for this year is 4 percent higher than last year’s average price of $1,268 and would be the highest average since 2013.
But it suggests gold will struggle to break convincingly above recent peaks of $1,374.91 hit in 2016 and $1,366.07 last year – which together form strong technical resistance.
“We need a strong impetus to break that resistance,” said LBBW analyst Frank Schallenberger.
“(But) with central banks buying more and more gold … interest rates staying low and economic perspectives looking dull, gold will eventually go up,” he said.
For silver, poll respondents forecast an average price of $16.05 an ounce this year, up from $16 in the poll three months ago, and $17 in 2020, down from $17.20 in the previous poll.
Editors Note: We would prefer not to get into the forecasting and predictions business as “crystal ball gazing” is fraught with uncertainty at the best of times.
This is particularly the case in 2019 given the massive macroeconomic, geopolitical, monetary and systemic uncertainty and risk of today.
It is worth remembering that many, if not most, of the precious metal poll respondents (both Bloomberg and Reuters) were bearish in gold’s last bull market despite gold rising every year from 2003 to 2012.
We were one of the few respondents who were positive on gold in those years. Analysts who were bullish were only mildly so. Yet gold saw massive gains and was the best performing asset in those years, particularly during the global financial crisis from 2007 to 2011.
We expect gold and silver to again outperform stock and bond markets. U.S. equity markets, including the S&P 500, Nasdaq etc are back at all time record highs, while precious metal prices remain very undervalued. The record highs are largely due to the massive out-performance of the FAANG stocks, some of which saw serious selling pressure this week.
It is a great time to re-balance portfolios. It makes sense and is prudent to take profits from stocks and bonds at these levels and acquire safe haven gold.
What is far more important than the price of gold is the value of gold as a hedge and safe haven asset. This has been seen throughout history including during the global financial crisis and indeed in the academic and independent research on gold in recent years.