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SHARPS PIXLEY FORECASTS GOLD TO AVERAGE $1310 WITH A HIGH OF $1390 IN 2017

Jan
18

SHARPS PIXLEY FORECASTS 2017

GOLD

HIGH   :  $1390           LOW :   $1148             AVERAGE   : $1310 

It is harder than ever to make a sensible gold forecast and with good reason. Markets are increasingly driven by political events (often impossible to predict) and correspondingly less by economic and market fundamental ones. Prima facie gold is a disaster with the key demand sectors including India, China and Central Bank softer compared to recent years ... yet we remain bullish. For us, a plethora of epic black swans could so easily put financial markets into a tailspin - be it the Eurozone elections, Middle Eastern geopolitical tension, debt ceilings, trade war between the US and China - but most of all - significant INFLATION.  

2017 should see gold prices challenging the downtrend in place since 2011 (currently at $1319) a breach of which sees further chart resistance at $1390. For longer term investors the rationale for owning gold is more compelling than ever - and that is the vulnerable macreconomic environment. Gold has become opaque and unpredicatble - as has the world - and that in itself is a good reason to own it. We think physical buyers will lift gold prices by 15%.

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SILVER


HIGH   :    $23.00          LOW : $15.95              AVERAGE   : $19.75

Like gold, silver needs to overcome the long term chart bear downtrend that goes back to 2011. For silver that challenge is currently at $18.60 and it is likely to be met during Q1. With a spate of european elections plus the unpredictable policy actions of the US under a trump administration, the outlook looks deeply uncertain and by extension, precious metals should remain well bid. Ordinarily we would see silver as a leveraged proxy for gold, however silver comes into 2017 still laden with a relatively large speculative overhang in both the ETF and in the futures markets and this should provide something of a drag on runaway prices, with profit-taking an ongoing feature as stale longs liquidate their positions and cap prices.  

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PLATINUM 

HIGH   :  $1100          LOW :  $906    AVERAGE   : $1023

There was an adage in the PGM sector which used to say "as goes car sales, so go PGMs" - well that has been manifestly untrue for the last couple of years with platinum prices stagnating to the lower end of a $900/$1200 range, while car sales hit record highs. The deleterious effect of substitution, thrifting and a lack of innovation to find significant new applications (where are you Johnson Matthey ???) coupled with scrap from recycled autocats has had a depressive effect on platinum prices. Our outlook is for platinum to continue to struggle to make headway but we see the price floor at $900 sustained but a lower high at $1100. As global industrial production stagnates there is relatively little reason for major optimism in platinum prices. Mine production in South Africa on the other hand looks likely to decline in 2017 which on balance should leave prices relatively flat on the year. 

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PALLADIUM

HIGH   :     $900       LOW :    $700    AVERAGE : $828

Palladium and its sister metal platinum usually travel together - the difference in 2017 is that palladium will travel first class while platinum stays in economy. The idea of the metals moving to parity has been unthinkable but technically and fundamentally there are grounds to believe the gap will continue to close as car sales look more promising in gasoline-burning/palladium catalyst regions over the diesel-burning/platinum catalyst regions - in other words China sustains growth in car sales at 15% while Europe car sales stagnate. Runaway palladium prices however are likely to be held in check by ongoing profit-taking by ETF holders at higher levels. We could see palladium deficits running at about 625,000 ozs in 2017.     

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About the author

Ross Norman

Ross started his business career with business guru Sir Clive Sinclair of Sinclair Research in Cambridge, before joining Johnson Matthey as Gold Refining Manager (then the worlds largest gold refiners), then as a gold trader at NM Rothschild & Sons (the Chairman of the London Gold Fixing) and later Credit Suisse, where he was a Senior Dealer in physical bullion trading.

Ross has an enviable record within the London Bullion Market in forecasting the gold price over the last decade and is frequently sought by the media for commentary on the bullion markets. Ross has made frequent appearances on TV (BBC, CNBC, CBC) in newspapers (FT. Wall Street Journal) as well as in the newswires (Reuters, Bloomberg and Dow Jones).

e: ross.norman@sharpspixley.com