PARIS: The French Bank Societe Generale in its latest report forecasts that gold prices having given away all its early year gains is headed further lower, as dollar gains strength. SocGen expects the bear market in gold to continue further. The gold prices are likely to average at $925 per ounce between 2016 and 2019.
According to the report, gold is likely to average at $1,150 per ounce during the second quarter of the year. The weakness in prices will extend to the fourth quarter, with gold prices expected to average at $1,050 per ounce. However, the full year 2015 gold price forecast has been lifted from earlier $1,025 per Oz to $1,130 per ounce mainly due to the strong rally in prices during Q1 2015.
The bank believes that the U.S. Fed will raise interest rates by 25 basis points by mid-2015. This will be followed by similar hike later during the year. The Fed may go more aggressive with more interest rate hikes during 2016. The interest rate cycle is likely to peak at 4% by 2017.
The physical demand for gold in key consuming countries China and India has not shown signs of pickup. The consumers are seen deferring high volume purchases expecting further drop in gold prices.
The gold mine production is likely to decline by nearly 9% during 2015. At the same time, the global gold demand is likely to grow only by 6% during the year, thus eventually leading to a supply surplus of around 100 tonnes.
SocGen also forecasts difficult times ahead for silver. The prices are likely to trend downwards to $14 per ounce by the end of 2015. The weakness is expected to prolong further with average prices likely to reach $13 per ounce in 2019. The global silver mine production will expand by 3.8% in 2015, whereas the global silver demand is likely to decline by 2.74% during the year.
