(Kitco News) - Forecasters in the London Bullion Market Association’s annual survey are upbeat on all of the precious metals in 2016, looking for palladium to post the biggest gains.
More than 30 analysts took part in the poll.
On average, they look for gold prices to rise 1.1% this year, compared to the average during the first half of January. Silver and platinum are expected to rise 5.4% on average during the same time frame, while palladium is expected to gain 12.7%.
In each instance, however, the forecast is below the actual average price for all of 2015.
“It is worth noting that this year analysts are more bullish about the prospects of precious metal prices than they were in last year’s survey,” said the LBMA in announcing the results. “Whilst analysts are bullish, this is only expected to be a partial recovery with prices of all four metals forecast to be some way below last year’s highs.”
Forecasters collectively predicted that the gold price will average $1,103 an ounce in 2016, which would be 1.1% higher than the first half of January, although still $57 below the actual average price in 2015.
“Contributors expect the outlook for gold prices in 2016 to be dominated by the size and frequency of U.S. Fed (rate) hikes and the impact on the strength of the dollar,” the LBMA said. “Some volatility in the price is expected, particularly given the political and economic uncertainty in the EU (European Union), Asia and the Middle East, with contributors forecasting that the gold price will trade in an average range of $978 to $1,231.
“Prices are expected to bottom out in the first half of the year and rally in the second half, boosted by demand from investors in Europe and Asia. The prospect of devaluations in the renminbi and support from investors in China is expected to help prop up the price.”
Meanwhile, analysts look for a 5.4% increase in the average silver price to $14.74, compared to the first half of January. The average range for the year is from $12.63 to $16.78.
“Positive influences for silver include the possibility of further supply deficits and a pick-up in jewelry and industrial demand, particularly in the electronics sector,” the LBMA said. “As well as pressure from Fed rate hikes, other negative influences for silver include the risk of oversupply in mine and scrap silver and further outflows from ETPs (exchange-traded products).”
The average 2016 platinum forecast of $911 is 5.4% above the first half of January, with an average price band of $748 to $1,076.
“Positive influences include the continued prospect of supply deficits, strong automotive demand, limited strikes and the outcome of wage negotiations in South Africa,” the LBMA said. “On the negative side, uncertainties prevail such as the long-term implications of the VW (Volkswagen) scandal.”
Forecast contributors are most bullish about the prospects for palladium, collectively predicting that the average prices will increase by 12.7% to $568 in 2016, compared to the first half of January. The range for the average was $413 to $674.
“Positive factors include the continued supply deficit and prospect of strong demand from gasoline and auto sales growth,” the LBMA said. “The first half of 2016 could be challenging as subdued oil prices weigh heavily on investor sentiment across all industrial commodities. For palladium, prices could be impacted by slower growth in car sales in the U.S. and China.”
By Allen Sykora of Kitco News; asykora@kitco.com
