In the aftermath of a strong U.S. employment report Friday, two financial bodies lowered their forecasts for the precious metals sector.
Analysts from Capital Economics said in their recent research note they slashed forecasts for gold and silver, and the reason for
this change is mainly due to the fact that a December interest-rate
hike in the U.S. now seems more possible after the jobs report. The body, however, is still optimistic towards the next year.
"A fall to $1,050 by
end-2015 would be consistent with a further rise in two-year Treasury
yields to 1% and some additional strength in the U.S. dollar against
other major currencies," they say referring to gold prices.
For
silver, Capital Economics said that they see the white metal edging down to $14.50
an ounce by year-end, but moving to around $20 in 2016. For gold in
particular, the analysts noted that "whether U.S. interest rates end
next year at zero or 2% will make very little difference to the demand
for gold from key emerging markets, which should still pick up again."
They add that they expect gold prices to be near $1,400 an
ounce by end-2016.
Analysts at Barclays have slashed their forecast for gold prices
in the fourth quarter after the bank lowered its view on when
the U.S. Federal Reserve will start hiking U.S. interest rates.
"We
have revised down our gold price forecast for Q4 15 to $1,100/oz and
the average price for 2016 to $1,054/oz from $1,170 and $1,215, respectively, partially reflecting a move in our Fed rate hike call from March 2016 to December 2015,"
the bank said.
Barclays released the report on a day when the U.S. Labor
Department reported that October nonfarm payrolls rose by 271,000. The analysts pointed out that during previous Fed hiking cycles, the yellow metal tended to
be higher six months after the hiking was launched. However, they don't expect this to happen this time again.
"We found almost all
factors we studied will work against gold in the forthcoming hiking
cycle. Real rates are set to rise; USD (dollar) is forecast to continue
its bull run; inflation expectations are at risk of shifting downwards
rather than up; and equity markets show limited upside after a
multi-year rally."
The noted that holders of Exchange-traded-funds are now possible sellers rather than buyers, and sentiment towards commodities is at a multi-year lows.