Precious Metals Price Outlook Economic Forecast

Precious Metals Price Outlook

U.S. monetary tightening and strong dollar cloud the outlook

Precious metals prices experienced a rollercoaster ride in 2016, with the gold and silver markets particularly affected by the events that shocked the word last year. Nonetheless, the precious-metals complex rose 10.1% annually in Q4 2016, ending the year on positive note, following a strong rally in Q3 2016.

This year’s outlook for the metals is less optimistic and it will be mostly driven by U.S. monetary policy and its impact on the U.S. dollar’s performance. In the short term, the expected Federal Reserve tightening cycle will be the biggest impediment to higher prices in precious metals. Gold has traditionally performed well within U.S. hiking cycles as the yellow metal has always been seen as a hedge against inflation. In terms of monetary policy in other developed economies, monetary easing in Europe and Japan continues unabated. The ECB will continue with its monetary easing until the inflation target is met, despite market concerns that it should come earlier. In Japan, subdued wage growth and declining inflation expectations should keep the Bank of Japan from raising interest rates as well.

Looking at 2017, prices are expected to perform poorly despite the many challenging events that are appearing on the horizon. Precious metals prices are expected to receive support from physical demand, given the sharp drop last year. In India—the world’s biggest gold buyer—it remains to be seen what impact on physical gold demand the government’s recent move to curb the black market money will have. India recently withdrew INR 500 and INR 1,000 notes from circulation and cash is used extensively to purchase gold. As cash supply dwindles, consumer purchases could dry up. As a result, precious metal prices are expected to drop just 0.4% year-on-year in Q4 2017 on anticipation of the Fed’s monetary tightening and its effects on U.S. credit markets and the dollar. Analysts also remain alert to Trump’s economic policies and risks around decisions made by G3 central banks. For Q4 2018, precious metals are expected to rise to 5.0%.

 

Precious Metals Historical Price Data

2012  2013  2014  2015  2016  
Gold1668.69  1410.71  1265.83  1159.8  1248.54  
Silver31.14  23.82  19.07  15.71  17.15  
Palladium643.47  725  803.44  690.55  614.03  
Platinum1549.48  1485.41  1383.61  1051.85  987.37  

Note:
Gold prices in USD per troy ounce (toz).
Silver prices in USD per troy ounce (toz).
Palladium prices in USD per troy ounce (toz).
Platinum prices in USD per troy ounce (toz).
All prices are average of period (aop).

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Price forecasts and historical data for Energy, Metals and Agricultural Commodities

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