The gold price will average $1,321 per ounce in 2015, Sharps Pixley CEO Ross Norman said this week.
The metal could fall as low as $1,170 per ounce, Norman added, and climb to a high of $1,450, up significantly from the current level of around $1,260.
“Our forecast is predicated on gold becoming price inelastic, as it was in the early 2000’s, and able to sustain the momentum,” Norman said. “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,” he added.
Norman believes ongoing declines in economic growth will prompt central banks to fight deflation by resorting to inflationary pressures in the second half of 2015.
Many market onlookers believe next week could see the announcement of broad-based government bonds purchases by the ECB at its policy meeting on January 22, given stagnant inflation in the bloc.
“If markets move on what you don’t know today, but will know tomorrow then it follows that many factors such as a US interest rate rise should already be factored into the current price… it also begs the question what the new drivers for 2015 will be,” he said.
Concerns over wage deflation however threatens to offset predictions on when the US will choose to raise interest rates, creating a more bullish environment in the near-term on gold denominated in the dollar.
“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 added.
Norman also believes that gold will demonstrate that it has turned a corner and investor flows will return with a vengeance, aided by short covering and fresh longs in the futures markets.
“Perhaps most disappointingly though we are unlikely to see runaway prices beyond the $1450 level without either significant new product innovations or without the sort of black swan events in the economy that few of us would wish for,” he concluded.
In other metals, Norman believes that silver will average $18.56 per ounce, favoring the metal that was the worst performer from the precious metals complex in 2014.
Silver will hit a high of $21.75 and a low of $14.50, with the metal currently trading around one month highs at $17 per ounce.
“With a firm outlook for gold, it follows that our expectations for silver would be similar … and a little more so… such is silver’s propensity to follow gold in a exaggerated fashion,” Norman said.
The Sharps Pixley CEO says that investors will take comfort from silver ETF holdings, which have remained firm, coupled with retail sales of the physical coins and bars. Mine production also looks set for a modest decline back to levels last seen in 1999, he said.
“Like gold, silver does seem to struggle to sustain momentum to the upside as it experiences ‘rally fade’ for this reason we do not see the likelihood of runaway prices just yet,” Norman added.
Norman’s 2014 palladium forecast came third in the LBMA’s annual precious metals survey in 2014.
(Editing by Tom Jennemann)