Sharps Pixley calls gold to average $1,321 through 2015

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Ross Norman, CEO of Sharps Pixley, the London based bullion broker that is part of the Degussa Goldhandel group, has said that gold is set to average $1,321 through 2015 as factors revive demand for the physical metal.

According to the broker’s forecast, prices will vary from a low of $,1170 to a high of $1,450.

The price movements are unlikely to be the result of a change in US interest rates – as this should already be factored into the current price, the broker says, but poor economic growth is set to push central banks to fight deflation and encourage inflation.

“If our outlook for gold in dollar terms is bullish, in emerging currencies it may be even more so as investors seek to insure or hedge against currency debasement. As such, we foresee good demand for the physical,” Norman said.

“Most annoyingly for bulls in 2014, gold exhibited ‘rally fade’ despite a global economy that was as fragile as ever. Our forecast is predicated on gold becoming price inelastic  – as it was in the early 2000’s – and able to sustain the momentum. I say annoyingly because arguably never before have savers potentially so needed an asset with the wealth preservation qualities that gold provides. Yet the price performance these last few years has disappointed.”

Gold is unlikely to break higher than $1,450 unless there is innovation in the gold market or the presence of a so called ‘black swan’ event – of the type that few would wish for in any case.

Silver prices are set to follow a similar pattern, given the historical correlation in pricing between the two metals.

Sharps Pixley’s forecast is for an average price of $18.56, with high and low prices respectively of $21.75 and $14.50.

“Investors will take comfort from silver ETF holdings which have remained firm – unlike gold – coupled with retail sales of the physical coins and bars which have remained robust,” Norman said.

Supply of silver is expected to moderate, because 75% is produced as a by product of base metals mining, and a weaker global economy may lead to cutbacks in such mining. Demand from industrial applications would therefore be weaker also, but Sharps Pixley sees investors ready to step into any void created.

 

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