Gold is expected to post its highest average annual price in four years in 2017, a Reuters poll showed on Friday, after bottoming out this year following three straight years of decline. The poll of 35 analysts and traders conducted over the last two weeks returned an average gold price forecast for 2017 of $1,331 an ounce. That would be the highest average since 2013, when the metal plunged 28 percent year on year.
Respondents predicted an average gold price this year of $1,270 an ounce, slightly above the current average of $1,258. That reflects a stronger expected performance in the fourth quarter, when prices are expected to average $1,300. Gold prices have rebounded this year as expectations faded that the Federal Reserve would press ahead with a plan to lift interest rates back to pre-financial crisis levels, having hiked rates for the first time in nearly a decade last December.
They should continue to recover next year, Mitsubishi analyst Jonathan Butler said, "driven by falling yields on sovereign debt securities, further quantitative easing in the euro zone and Japan and a slow rate of macro tightening in the US" The first six months of this year had the highest half-year total of gold exchange-traded fund purchases on record, even as jewellery demand for the precious metal declined in the face of higher prices.
Higher seasonal jewellery demand from major consumers China and India in the fourth quarter should help overall demand, analysts said. "Gold should be underpinned by stronger physical buying out of India and China, but gains will be moderated by the high probability of the Fed lifting US interest rates in December," Societe Generale analyst Robin Bhar said.
Silver prices are also tipped to bounce back this year and next, with the poll returning an average silver forecast of $17.50 for this year and $18.90 for next. That would be silver's strongest year since 2014. Silver prices put in their weakest performance since 2009 last year, averaging $15.68, but have since recovered in line with gold. In addition to its use as an investment metal, silver is also widely used in industry, and is more sensitive than gold to an upturn in the economic cycle.
It has outperformed gold towards the end of this year after lagging gold's gains in the first quarter, when the gold/silver ratio rose to a 7-1/2 year high at 83. "Silver will rise in 2017 and might even rise faster than gold, as the gold-to-silver ratio seems to be reversing downwards after hitting the historical resistance range of 80-85," Phillip Futures said.