Gold Price Forecasts: Tom Kendall

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.

Tom Kendall

ICBC Standard Bank, London

Gold: Range: $1,100 – $1,320

Average: $1,175

Do you believe that the Trump administration can push through corporate tax reform of sufficient scale that capital inflows to the US will accelerate, consequently the dollar will get even stronger, business investment will pick up and the Federal Reserve will have to tighten by at least 75 basis points? All without precipitating debilitating trade conflicts with China, an EM currency crisis as the carry trade implodes, or internecine fighting between hard money Republicans and those with more moderate fiscal instincts?

Sounds improbable, but during the first half of this year, we think team Trump should be able to keep internal divisions at bay and that policy announcements (albeit probably not too much actual legislation) will be sufficient to lift expectations and keep internal divisions at bay. With inflation also expected to accelerate (thanks largely to base effects in energy and soft commodities), the Fed will likely need to act again in March. A new goods and sales tax in India is a concern for gold jewellery demand, and China is unlikely to relax capital controls much in the near term. We expect all that to keep gold on the back foot until around mid-year, by which time the focus will likely be shifting to how the US is going to pay for Trumponomics. A new debt ceiling well in excess of $20 trillion will need to be approved and the budget deficit is likely to be widening again. That should be the cue for a more sustainable turnaround in gold than we have seen so far. We don’t believe there is much downside risk to our forecast. Conversely, if the new administration gets bogged down in protectionism or Affordable Care Act arguments, or stumbles over foreign policy missteps then the dollar will likely roll over a lot sooner. Rising rates could also pull the rug from under the US real estate market, but we think that is more likely to be a 2018 story.

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