Wednesday, 20 December 2017 05:00 WIB | GOLD CORNER |Gold OutlookGold Corner
Gold prices will average $1,280 an ounce in 2018, with buying interest, as an inflation hedge and due to loose monetary policy globally, offset by a strong U.S. dollar, said BMO Capital Markets in a report late Monday.
œA slow and steady interest-rate hike cycle proposed by the Federal Reserve and subdued investor demand are expected to keep prices in check and cap any significant upside potential, the bank said.
Analysts described the metal as œremarkably stable over the last two years, compared to the broader commodity complex, saying gold prices were range-bound during normalization of monetary policy and as dissipating geopolitical risks meant less safe-haven interest. This was offset by building inflationary pressures, which meant some market participants are looking to increase their allocation to gold as a hedge.
œWe see benefit coming from still-loose monetary policy and renewed inflation concerns, but potential for headwinds from dollar strength, BMO said.
Macroeconomic data point to a strong U.S. economy, with the labor market nearing full employment, BMO said. U.S. inflation is forecast to slowly move toward the long-term target of 2%, BMO continued. The market anticipates at least two more Federal Reserve rate hikes in 2018 in the wake of another 25-basis-point tightening in December.
œWith this outlook already priced in at the current price levels, we do not expect a significant deviation from the expected range-bound outlook over the near term unless the U.S. Fed drastically shifts from its current policy framework, BMO said.
Traders will be closely watching for any monetary-policy signals from incoming Fed Chair Jerome Powell, although he is expected to maintain the course set by outgoing Chair Janet Yellen, BMO said.
Meanwhile, gold should benefit from œover-allocation by investors in emerging-market nations who have a lack of other options, BMO said.
The bank™s $1,280-an-ounce outlook for gold in 2018 is a downward revision of 1.5% from its previous estimate. Analysts then look for a $1,250 gold average in 2019.
Source: Kitco News