Gold Price Forecasts: Philip Klapwijk

The London Bullion Market Association (LBMA) asked 23 Gold analysts from around the world for their predictions on the average, high and low price range for the year ahead for Gold. Analysts who contributed to the Survey were invited to identify the top five drivers likely to influence the gold price in 2017. The top two drivers were the US dollar and US real interest rates, followed by demand in China and India, globaal political events and President Trump’s fiscal and International policies. Gold Stock News presents what the Analysts forecast for Gold in 2017.

Philip Klapwijk

Precious Metals Insights Hong Kong

Gold: Range: $1,140 – $1,362

Average: $1,288

Expectations of higher US interest rates, a stronger American currency and rising stock prices might be thought to spell danger for the gold price in 2017. Such a backdrop would appear to rule out a repeat of the massive investment demand seen over much of 2016. However, gold’s rebound from its $1,126 low in December may indicate that, notwithstanding these headwinds, the price can recover further this year as sufficient investors believe the precious metal to be a good hedge against economic and political uncertainties. The post-election euphoria regarding US growth prospects that has shifted interest rate expectations, boosted the dollar, and driven up stock prices is excessive, and aggressive forecasts on all these fronts are set to be moderated. For instance, while US interest rates will most likely increase by 50-75 basis points this year, the Fed is still going to be ultra-cautious in tightening monetary policy, especially in the context of an already much stronger US dollar. Moreover, a rise in US inflation is set to outpace this increase in short-term policy interest rates because of wages rising faster (due to a tighter labour market), the impact of higher oil prices and, possibly too, as a consequence of protectionist trade measures driving up goods’ prices. As a result of higher inflation, real US rates could well decline somewhat from current levels. Even moderately negative real interest rates would limit the dollar’s upside and support gold prices. In addition, besides what may turn out to be a mildly positive economic backdrop, the precious metal should be buoyed by growing political concerns in 2017.

Since the collapse of the Soviet Union, geopolitical factors have rarely tended to affect gold prices and then only temporarily. This paradigm is likely to be tested though under President Trump, who has to date shown little regard for the fundamental foreign policy consensus of past Republican and Democratic administrations. Questions about the quality of American leadership and the country’s commitment to the postwar global order come at a time of rising tensions in Asia and Europe, in particular with China’s growing power an issue for the former region and the EU’s acute difficulties together with Russian revanchism affecting the latter region. Overall, it is fair to say that geopolitical risk is set to increase to a level not seen since the end of the Cold War. Gold is certain to benefit from the return to a less benign state of international affairs.

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