CIBC Analysts Lower Gold, Silver Price Forecasts, Don’t Expect Higher Prices Anytime Soon
Hong Kong (Nov 17) Gold prices could be in the process of finding a floor in the marketplace but analysts at CIBC are not expecting a recovery anytime soon as they have lowered their price forecast for both gold and silver.
Friday, the Canadian bank released an updated forecast for the gold and silver market. The analysts lowered their 2014 average price to $1,250 an ounce, from their previous forecast of $1,350 an ounce; they are expecting prices to average $1,200 an ounce in 2015, down from their previous forecast of $1,300 an ounce, and their long-term forecast is for gold to average $1,200.
The analysts added that the drop in gold has also damaged the silver market and they now expect the price to average $18.50 an ounce, down from their precious forecast of $22.00 an ounce; they are also expecting the price to average $17.00 an ounce next year and in the long term, down from their previous forecasts of $20.00 and $18.00 an ounce, respectively.
“The collapse in gold has damaged silver on two fronts. First, with silver always dropping faster when gold is also falling, the gold/silver ratio has now expanded to 75x. Second, with gold beginning to test the base of production costs in that sector, silver has already cut right through that to well below the $17.00/oz. level where a material proportion of the space was ‘surviving,’” the analysts wrote in their report.
CIBC is also expecting volatility in the precious metals market to be high in the coming year as prices could drop to $1,000 an ounce, but any significant drop would probably be shorted-lived; they added that there are signs that the market is finding some equilibrium, albeit at lower prices.
Although their outlook for gold and silver is bearish, in the short-term they said that gold and silver prices could see a bounce as the market reevaluates the state of the current U.S. economic recovery.
They noted that the market has fully priced in the economic recovery and an interest rate hike from the Federal Reserve in 2015 and there is no new information to propel the U.S. dollar higher, gold lower in the near-term.
“We cannot, and will not, argue the fact that the U.S. is delivering the best growth among major global economies but can see difficulty arising in the U.S. economy delivering the levels of growth it would like to achieve, or that perhaps the market expects it to achieve, when global growth in aggregate remains subdued,” they wrote in the report.
The analysts said the biggest factor that will help to support gold prices is continued to demand in the face of lower supply. Because of the low price, they are not expecting to see any new mining production or exploration. They added that prices would have to rise back to $1,500 an ounce “as a minimum level to resurrect interest in developing gold projects.”