Precious Metals

The firm sees the metal averaging just $1,125 in Q2, then $1,160 in the second half of the year. However, it also believes gold will bottom in 2015 and start building “a base for [a] long-term bull market.”

The gold price was down on Thursday, sitting at $1,257 per ounce as of 1:23 p.m. EST, but fans of the yellow metal nevertheless received some good cheer. 

It came in the form of the second of two interim updates to Thomson Reuters’ (TSX:TRI,NYSE:TRI) GFMS Gold Survey 2014. In it, the firm looks at gold market activity in 2014 and touches on its expectations for 2015. Though it sees the metal averaging just $1,125 in Q2, then $1,160 in the second half of the year, it also believes gold will bottom in 2015 and start building “a base for [a] long-term bull market.”

That sounds pretty promising, but as its price predictions suggest, the firm is clear that gold isn’t out of the woods yet. It points out that further commitments towards easing from the Bank of Japan, the People’s Bank of China and the European Central Bank failed to boost precious metals prices in 2014, noting that “any meaningful influence on precious metals prices seems to be mainly stemming from monetary policy discussion at the Fed.”

According to Thomson Reuters, that’s important because in the short term, US monetary policy will be aimed at raising interest rates — specifically, it sees the Fed increasing rates midway through 2015 and believes the anticipation of that action will provide “a negative backdrop for the gold price in 2015.”

It also points to Russia as a risk for the gold price in 2015. The country is in the midst of a currency crisis, and Thomson Reuters states that if it continues to sell off its foreign-exchange holdings, it may sell some of its gold as it did during a 1998 crisis. The firm describes that scenario as “very unlikely,” but cautions that if it does come to pass there would be “a knee-jerk downward reaction in the gold price.”

As mentioned, the bright side is that Thomson Reuters “expect[s] the [gold] price to bottom this year … as we enter the ‘sell the rumor buy the fact’ environment with respect to itnerest rates coupled with improving fundamentals.”

Goldman, Barclays weigh in

It’s interesting to note that while Thomson Reuters’ short-term gold price predictions are relatively in line with those from other firms, not all have the same longer-term outlook for the precious metal. For instance, in a recent article, Mineweb’s Lawrence Williams points out that Goldman Sachs (NYSE:GS) sees gold’s three-month average at $1,290, and its six- and 12-month averages at $1,270 and $1,175, respectively. However, it’s calling for the yellow metal to move down after that, ultimately averaging just $1,000 by the end of 2016.

Furthermore, Barclays (LSE:BARC,NYSE:BCS) anticipates an average 2015 gold price of $1,170, but like Goldman Sachs, it believes that while the yellow metal may enjoy some near-term strength, “the rally is likely to come under pressure in the coming months, after the Lunar New Year.”

It’s too soon to which — if any — of these scenarios will come to pass, but the differences in opinion are certainly worth keeping in mind.

 

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

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