Jon C. Ogg
It seemed perhaps self-serving. After all, they are very pro-gold. Now we have yet another call that lower gold prices are likely to bring in gold buyers.
A
Credit Suisse report from its Precious Metals group issued on Friday
showed that the consolidation in gold has actually provided a more
attractive entry point. This was a commodity specific view for gold and
silver, but the issue for gold is that Credit Suisse expects that the
price of $1,200 per ounce should hold.
The
report talked about rate hike expectations, economic data, the
presidential election and more. Credit Suisse is sticking by its
continued bullish view on gold — it reiterated $1,400 per ounce in 2017.
Credit Suisse's thesis continues to be driven by rates, uncertainty,
wealth preservation, central banks and even mine supply.
Some
price targets were tweaked in this call. Credit Suisse's gold price
forecast to $1,325 per ounce in the fourth quarter of 2016 and $1,450
per ounce in the first quarter of 2017 — from $1,500 per ounce.
Despite
the recent pullback in gold to about $1,250, the firm sees the metal
supported at $1,210, if the market prices in a 100% probability of a
Federal Reserve rate hike in December. Still, Credit Suisse did say that
it believes gold will see a rally once the December 14 Federal Open
Market Committee meeting passes — or if global developments reduce the
likelihood of another rate hike.
On
the supply/demand front, Credit Suisse sees the deficits forecast to
continue into 2017. The analysts noted a likely 144 tonne supply deficit
in 2016, and they see the deficit rising to 211 tonnes in 2017. The
2016 deficit was weak jewelry demand, but the 2017 deficit expectation
is expected to be from mine supplies and also from sustained investment
demand from exchange traded funds and central banks, with a small
rebound in gold jewelry demand.
Recycled gold supply is price sensitive,
and Credit Suisse forecasts a modest rise in 2017.
Credit Suisse said:
Since
August the focus has shifted to near term drivers including an
impending Fed rate hike on the back of stronger US data (market now
pricing in a 68% probability of tightening by December), a strong USD
and weaker GBP on a reiteration of Brexit on perhaps a faster timeline
than was anticipated, and lastly a reduced likelihood of a Trump
presidency based on recent polls. Gold futures appear to have driven the
gold price sell off with 8.2Moz of outflows since their peak on July
5th. Meanwhile ETF holdings have continued to steadily increase, albeit
at a slower pace than earlier in 2016.
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