Gold Outlook 2016: Analysts Calling for Sub-$1,000 Gold

The US dollar is expected to continue pressuring the gold price in 2016, and many firms are now calling for the metal to fall below $1,000.

At the end of last year, gold market watchers were feeling fairly optimistic about the metal’s prospects. While analysts were calling for a weak start to the year, the expectation was that the gold price would gain momentum later in 2015. 
Unfortunately, that’s not exactly what happened. While gold began the year just below the $1,300-per-ounce mark, it’s taken quite a tumble since then — as of midway through December, it was down over 10 percent year-to-date, trading at about $1,065.
Take a look at the below chart from Kitco for an overview of gold’s price activity in 2015:

GOLD YTD
Gold price year-to-date as of December 22, 2015. Image courtesy of Kitco.

To find out what moved the gold price in 2015, and to get an idea of the gold outlook for 2016, the Investing News Network (INN) reached out to Martin Murenbeeld, chief economist at Dundee Economics. Here’s what he had to say.

2015 gold themes: US dollar in focus

Anyone who put even a toe into the gold space in 2015 is no doubt aware that the US dollar had a major impact on the gold price. Indeed, speaking to INN, Murenbeeld emphasized, “gold was damaged by strength in the US dollar — in fact, all commodities were to a greater or lesser degree.”
And indeed, the US dollar was undeniably strong in 2015. Bloomberg notes in a recent article that Intercontinental Exchange’s US dollar index, which tracks the currency against six of its key peers, reached its highest level since April 2003 on December 2; in the three months leading up to that date, the index gained 4.5 percent.
That strength was harmful for gold and other commodities in large part because it boosted expectations of an interest rate hike from the US Federal Reserve. The threat of an interest rate rise was particularly damaging for gold because gold earns no interest, and thus tends to fare better when interest rates are lower; conversely, when interest rates are higher, it becomes less desirable as an investment.


Ultimately, the Fed did opt to raise interest rates, though it did so much later than expected, at its last meeting of the year. Specifically, the central bank bumped the target range of the federal funds rate to 0.25 to 0.5 percent, hinting that further increases would be gradual.
The gold price didn’t initially react much to that news, but the day after its release it was struggling, with COMEX gold futures for February hitting a six-year low of $1,049.60. Since then, however, it’s bounced back a little. On the flip side, the US dollar has suffered since the rate hike took place — according to Bloomberg, as of December 21 it was down about 2 percent in December.
Aside from the US dollar, there were few events that had a major impact on the gold price in 2015. One other worth mentioning, said Murenbeeld, is China’s yuan devaluation this past August. It caused a “brief flurry in the gold price,” but nothing lasting.
Overall, Murenbeeld said that Dundee Economics sees the gold price averaging $1,165 in 2015.

Gold outlook 2016: Is the Fed for real?

Heading into 2016, Murenbeeld sees more difficulties coming for gold, largely because — despite its weakness in the wake of the rate hike — “the dollar is widely expected remain firm/rise further.” As a recent Kitco article points out, a key question for gold investors in 2016 will be “how much further will the US dollar rise?”
That said, the US dollar isn’t the only factor with the power to impact gold in 2016. Murenbeeld also noted that positive catalysts for the metal could include “further equity market setbacks, global economic deterioration, more QE abroad and no further hikes in US rates after December 2015.”
That last point seems to be one that market watchers are honing in on. As mentioned, the central bank indicated at its latest meeting that it plans to pursue a gradual increase in rates, but there has been some uncertainty about whether that will actually happen. Notably, famed economist Marc Faber recently criticized the Fed for raising interest rates, stating that “the global economy is probably already in recession now” and opining that “[w]hen the Fed realizes the economy is in recession, they will cut [interest rates] again.”
All in all, it seems that, as was the case in 2015, the US dollar and the Fed will be key factors for gold investors to watch in the new year.


In terms of specific gold price forecasts, Dundee Economics sees gold at a baseline price of $1,170 in 2016, while Morgan Stanley’s (NYSE:MS) baseline price is $1,149 (Morgan Stanley is calling for $1,382 in a bullish scenario and $976 in a bearish scenario). HSBC (NYSE:HSBC) is calling for gold to average $1,205 next year.
That said, other firms are not so optimistic. For instance, Scotiabank anticipates gold averaging $1,090 in 2016, while Citi Research said in a recent report that it sees gold averaging $1,030 in Q1, then declining gradually to an average of just $960 in Q4. Similarly, Societe Generale (EPA:GLE) sees gold at $955 in the fourth quarter of 2016, while Barnabas Gan, the most accurate gold forecaster in Q3 2015, according to Bloomberg, sees gold perhaps dropping to $950 by the end of 2016. The Bank of America Merrill Lynch anticipates a gold price of $950 early in 2016.
Other big-name firms calling for a lower gold price in 2016 include Goldman Sachs (NYSE:GS) and JPMorgan Chase (NYSE:JPM), which both see the metal “fall[ing] to the psychologically important $1,000 US-per-ounce level — or lower — in 2016.”

Investor takeaway: Patience is (still) a virtue

While there may be some relief for the gold price in 2016, it’s definitely possible that the year will be equally as tough as the last few. And while investors may be getting tired of hearing it, a key point to remember in tough times like this is that the resource markets are cyclical, meaning that what goes down must (eventually) come back up. Gold bugs will no doubt be waiting to see if 2016 is the year that happens.

Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.
Related reading:
Gold Outlook 2014: Will Gold Bounce Back?
Gold Outlook 2015: Analysts Anticipate a Break from Turmoil
Gold Trends 2015: CEOs Recap the Year

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cannabis plant layered with German flag graphic
Dmytro Tyshchenko / Shutterstock

Catch up on some of the biggest news of the week for the cannabis investment world.

Three political parties have formed a coalition in Germany, leading to a new government, and it has promised cannabis reform in the European nation.

Meanwhile, a popular cannabis retailer confirmed consumers will now find its products available for delivery on the Uber Eats mobile application in Ontario.

Keep reading to find out more cannabis highlights from the past five days.


Coalition of parties promises forward-looking cannabis policy

Germany, a country with comprehensive and elaborate medicinal rules for cannabis, is in a time of transition as a new government is set to begin to take over after 16 years of Angela Merkel.

Olaf Scholz, the proposed next chancellor of Germany, leads a three party coalition that will become the country's governing body. As part of its promises, talk of adult-use cannabis regulation has now gained even more momentum. A report from MJBizDaily quotes a German policy document that shows the coalition's stance:

"We are introducing the controlled distribution of cannabis to adults for consumption purposes in licensed shops. This controls the quality, prevents the transfer of contaminated substances and guarantees the protection of minors."

However, despite the promise and excitement, it remains to be seen how these ideas will be applied since no formal regulations have been drafted or approved yet.

Canadian cannabis retailer partners with popular delivery app

Tokyo Smoke, a cannabis retail operator in Canada owned by Canopy Growth (NASDAQ:CGC,TSX:WEED), announced a collaboration agreement with Uber Canada (NYSE:UBER) whereby cannabis consumers will be able to use the Uber Eats app to order products before they visit stores.

While the app won't let consumers get cannabis delivered to them, this new method opens the doors to more dynamic ways of buying cannabis.

"As a market leader in innovation and a platform used by so many Canadians, we believe this is the ideal next offering that can be done safely and conveniently on the Uber Eats app," Mark Hillard, vice president of operations with Tokyo Smoke, said in a press release.

A report from the Canadian Press indicates Ontario is considering allowing dispensaries to have delivery and pickup options made available to consumers permanently. The province allowed some of these purchasing options at the outset of the COVID-19 pandemic, but then removed them.

Lola Kassim, general manager of Uber Eats Canada, said this new end-to-end experience will provide consumers with responsible access to legal cannabis products.

Cannabis company news

  • Organigram Holdings (NASDAQ:OGI,TSX:OGI) issued financial results for its Q4 2021 period. In its report, the company notes a net loss of C$26 million despite a 22 percent uptick in net revenue to C$24.9 million. Beena Goldenberg, the newly appointed CEO of the firm, is encouraged by the market share position earned by the company, which said it became the fourth biggest producer in Canada during the reporting period.
  • Halo Collective (NEO:HALO,OTCQB:HCANF) confirmed the decision for Akanda, its spinoff company focused on international cannabis opportunities, to begin trading on a US exchange. "The number of shares to be offered and the price range for the proposed offering have not yet been determined," the company told investors in a press release.
  • High Tide (NASDAQ:HITI,TSXV:HITI) announced the acquisition of 80 percent of NuLeaf Naturals, a CBD product wellness developer, for an estimated US$31.24 million. The deal includes a three year option clause for High Tide to complete a total acquisition. "As international markets open up and as export regulations evolve, NuLeaf's cGMP-certified facility positions us to take advantage of the global CBD business opportunity," Raj Grover, president and CEO of High Tide, said.
  • Humble & Fume (CSE:HMBL,OTC Pink:HUMBF) released the financial report for its first 2022 fiscal quarter to shareholders and the market. "As the legal cannabis market in North America continues to mature, Humble remains agile and focused on providing a leading solution for brands to scale quickly and retailers to focus on their customers," Joel Toguri, CEO of Humble, said.

Don't forget to follow us @INN_Cannabis for real-time updates!

Securities Disclosure: I, Bryan Mc Govern, hold no direct investment interest in any company mentioned in this article.

Commercially viable scandium deposits are rare, making widespread use of the metal tricky. However, there is indeed opportunity in the space.

Scandium is a critical metal that is as strong as titanium, as light as aluminum and as hard as ceramic.

While it is more abundant than lead, mercury and all the precious metals, there are no pure scandium-producing mines. The rare earth element is often a by-product, produced from refining other metals, including uranium.

Pure scandium metal rarely concentrates at higher grades alongside other metals, making commercially usable scandium deposits very rare. What's more, even when scandium is found at elevated levels, processing it can be difficult, leading to very few stable sources of this critical metal.


Not surprisingly, that means there has been very little adoption of scandium in commercial applications. However, as John Kaiser of Kaiser Research has pointed out several times in the past few years, as well as more recently, that doesn't mean there hasn't been research into how scandium could be used in the future.

"Hundreds of applications (have been) filed, many of them related to alloys with aluminum," he said in an interview with the Investing News Network. "This obscure metal is going to go ballistic in the next few years."

Kaiser made that statement a few years back, and scandium has yet to go ballistic. But he still has hope for the metal, and it could yet have its day in the sun.

Below is an overview of the scandium market. Topics covered include current production, newcomers to the space and the metal's potentially bright future.

Current scandium production

The first known large-scale scandium production was associated with Russian military programs. Details are lost to history, but Russians reportedly alloyed the metal with aluminum to make lightweight MIG fighter parts. Mining at these historic Russian production sites has ceased, but stockpiles of scandium oxide and scandium master alloy remain in Russia. These stockpiles are rumored to be dwindling, but continue to be offered for sale on the market.

Today, most scandium is produced as a by-product during the processing of other ores, such as uranium or rare earths, or recovered from previously processed tailings. As a result, scandium supply can be affected by the supply and demand dynamics of the metals it is produced with. That can make the metal's already tough-to-follow market dynamics even more difficult to understand.

According to the US Geological Survey, scandium-producing countries include China, where it is a by-product of iron ore, rare earths, titanium and zirconium; and the Philippines, where it is a by-product of nickel. Scandium is also produced as a by-product of uranium in Russia, Ukraine and Kazakhstan.

More US production could be on the horizon as well after a push in legislation that encourages the Department of Defense to look into the potential uses of the metal. Environmental and construction permits have been approved for NioCorp's (TSX:NB,OTCQX:NIOBF) polymetallic Elk Creek project with probable reserves estimated to be 36 million tonnes containing 65.7 parts per million scandium.

Scandium resources have been identified in minerals-rich regions across the world, most notably in Australia, where a number of junior mining companies are working to develop scandium deposits in New South Wales. These include Scandium International Mining (TSX:SCY), which controls the Nyngan project; Clean TeQ Holdings (ASX:CLQ,OTCQX:CTEQF), which holds the Sunrise project; and Platina Resources (ASX:PGM,OTC Pink:PTNUF), which is working on the Owendale project.

Scandium price and trading

The US Geological Survey states that the global scandium market is "small relative to most other metals." This is exemplified by global production and consumption, which is only an estimated 15 to 20 metric tons annually.

The US Department of Commerce and the International Trade Commission do not have specific data on trading for the metal. Furthermore, there is no formal buy/sell market today — scandium is not traded on an exchange and there are no terminal or futures markets.

Instead, the metal is traded between private parties, mostly at undisclosed prices and in undisclosed amounts. Therefore, understanding the precise volume of production and cost of scandium is difficult, and independent estimations are more relevant.

Production estimates are based on levels of trader activity and interest, as well as the knowledge that some traders deal in the critical metal from very small operations.

The estimates also include consumers believed to be sourcing their own scandium through small, controlled recovery operations, but don't consider amounts of the metal contained in the master alloy currently being sold from Russian stockpiles.

The scandium opportunity

Analysts expect the global scandium market to grow at a compound annual growth rate of above 11 percent between 2020 and 2025. "The major factors driving the growth of the market studied are the accelerating usage in solid oxide fuel cells, and the rising demand for aluminum-scandium alloys," notes ReportLinker.

Despite the lack of known, stable supply, scientists and engineers have been working hard to develop new products incorporating the metal. Scandium's potential in high-tech applications is well documented. Highlights of the metal's properties include:

  • It can be used in the creation of stronger, corrosion-resistant, heat-tolerant and weldable aluminum alloys for lightweight aircraft and automobiles.
  • Its outstanding electrical properties and heat resistance are valuable for solid oxide fuel cells.
  • It has unique optical properties for high-intensity lamps.

A recent Kaiser Research report on scandium details the wide variety of end uses for scandium now and into the future, as well as where potential supply to meet that demand may originate.

potential scandium oxide supply and demand

Potential scandium oxide supply and demand.

Kaiser Research

As Kaiser has explained, "There's an enormous latent demand for scandium if it ever became available on a primary, scalable basis."

In other words, the only barrier to accessing demand from a new family of high-performance aluminum materials and energy/lighting products is the lack of commercially viable larger-scale scandium production. Interestingly, Kaiser's work highlights two important scandium market events that may "have the potential to launch scandium demand growth over the next decade towards a 1,000 (tonne per annum) market worth US$2 billion."

For one, Rio Tinto (NYSE:RIO,ASX:RIO,LSE:RIO) announced in 2020 that it has developed a route to recovery for scandium at its Sorel-Tracy facility in Quebec, where it produces titanium slag from the Lac Tio iron-titanium deposit. In mid-2021, Rio Tinto began commercial-scale operations at its new scandium oxide production facility.

"The Rio Tinto development is a game changer for the scandium sector," said Kaiser, who believes the increase in scandium production could help boost the sector.

Secondly, Scandium International Mining filed an application in late 2019 for a patent protecting a method for recovering scandium and other metals from the waste streams of copper oxide leaching operations. In mid-2020, the company announced that copper raffinate tests showed its patent-pending process could recover enough scandium to match the supply being added to the market by Rio Tinto.

"Conditions are finally right for scandium to become the ideal lightweighting solution for aluminum," Kaiser said in his note to investors.

This is an updated version of an article originally published by the Investing News Network in 2014.

Don't forget to follow us @INN_Resource for real-time news updates!

Securities Disclosure: I, Melissa Pistilli, hold no direct investment interest in any company mentioned in this article.

Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.

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