The winners of the LBMA’s 2015 Annual Forecast Survey have recently updated their 2016 forecasts for the precious metals prices. What do they expect now?
Bernard Dahdah, who formulated the most accurate gold forecast for 2015, changed his average forecast for 2016 from $970 to 1,275. He pointed out that most of the movement in the price of gold during the early phase of the year can be attributed to interest rate cuts in Japan and the Eurozone. The 25-percent crash in the Shanghai Composite and delays in raising rates by the Fed have also helped lift the price of gold. Moreover, the lower opportunity cost of holding gold due to negative interest rates and the rise in uncertainty caused by the Brexit vote have helped further raise prices. Therefore, he expects that the Fed will not hike interest rates until the end of the year, which should be positive for the price of gold. According to him, gold faces one upside and one downside risk. The prolonged and messy negotiations between the UK and Europe could lead to further uncertainty and additionally support gold prices. On the other hand, should the Fed raise rates earlier than expected, we could see sharp outflows from the gold market.
Rene Hochreiter, who had the best forecast for silver prices in 2015, revised his forecast for the average price of this metal in 2016 from $13.50 to $17.10. He believes that the precious metals prices “will trend upwards for the rest of this year with the massive uncertainty generated by the Brexit vote in Britain and in Europe, the uncertainty developing around the upcoming US elections in November and the knock-on effect of this general uncertainty around the globe”. Moreover, the likelihood of a U.S. recession in the next three years is becoming very high, according to him.
The bottom line is that the winners of the LBMA’s 2015 Annual Forecast Survey revised their 2016 forecasts for precious metals prices upward. They expect an average price of gold at $1,275 and $17.10 for silver. Other analysts also upgraded their gold price forecasts – the median Bloomberg forecast for the end of 2016 is 16 percent higher than it was at the beginning of the year. However, it is typical behavior as market analysts often follow the trend and become more bullish during rallies and more bearish during declines. Therefore, investors should always take price forecasts with a pinch of salt, even if, like right now, these revisions seem to be justified due to changes in the global economy, politics and monetary policies.
Disclaimer: Please note that the aim of the above analysis is to discuss the likely long-term impact of the featured phenomenon on the price of gold and this analysis does not indicate (nor does it aim to do so) whether gold is likely to move higher or lower in the short- or medium term. In order to determine the latter, many additional factors need to be considered (i.e. sentiment, chart patterns, cycles, indicators, ratios, self-similar patterns and more) and we are taking them into account (and discussing the short- and medium-term outlook) in our trading alerts.