GOLD PRICES will hold 18% stronger in 2016 than previously thought according to last year’s most accurate forecaster, with weakening global growth and the move to negative interest rates in central-bank policy (NIRP) driving ETF and other gold investment.
Gold edged higher Tuesday morning to come within $2 of Friday’s 13-month high near $1280 per ounce as world stock markets fell following much weaker-than-expected trade data from China.
China’s imports shrank almost 14% year-on-year in February, but exports crashed 25%, crushing the country’s trade surplus from a record $63.3 billion to $32.6bn.
The Chinese New Year period, however, typically shows a sharp drop in China’s trade surplus, giving the lowest monthly figure in each of the last 10 years.
Major government bonds jumped in price, pushing yields sharply lower and taking 10-year Japanese rates to minus 0.09%.
The Dollar held tight around $1.10 per Euro on the FX market. Thursday’s meeting of the European Central Bank is now widely expected to see it extend NIRP still further on its deposit rate.
“On the back of difficult and uncertain global markets, gold prices have risen by almost 20% so far this year,” notes Bernard Dahdah, precious metals specialist at French investment and bullion bank Natixis, the best gold price forecaster of 2015, and formerly the second-most bearish amongst 31 professional analysts predicting how gold will perform in 2016.
Winner of last year’s London Bullion Market Association forecast survey after predicting 2015’s average gold price down to the dollar, Dahdah previously said gold would fall below $1000 by the end of this month, and average just $970 for 2016 as a whole.
Now however, and “in light of [the bank’s] updated view on global markets,” Dahdah has raised Natixis’ full-year forecast by 18% to $1150 per ounce.
“Higher gold prices this year,” he explains, “have been mainly driven by the announcement of negative interest rates some key central banks, the collapse in the Chinese stock market, and finally expectations that the Fed will raise rates at a slower than expected pace.”
As recently as 8 January, Dahdah said that “the main theme affecting gold this year [would] not be a Chinese slowdown but the expected…interest rate hikes by the Fed.”
Natixis’ previous 2016 outlook – beaten as a bearish call only by fellow French bank BNP Paribas’ forecast average of $960 – also said outflows from physically-backed ETF investment trusts would also continue “as higher-yielding investments and a stronger Dollar [became] more attractive to investors.”
Unchanged Monday, the quantity of bullion needed to back shares in the giant SPDR Gold Trust (NYSEArca:GLD) has now swelled by 150 tonnes since New Year, reversing all of 2014 and 2015’s outflows in just 10 weeks.
One of the GLD’s competitor ETFs, the Blackrock iShares Gold Trust (NYSEArca:IAU), said Monday it sold 25 million shares between mid-February and last week without registering them with US regulators the SEC.
Describing the compliance failure as “inadvertent”, asset-management giant Blackrock said it may have to buy back those shares – transferred at a value of $296 million – and those stock-buyers affected “may have the right to collect damages” plus interest.
Last Friday’s price high of $1280 now means gold has exceeeded 24 of the 31 analysts’ peak forecasts for 2016 in this year’s LBMA competition.
With gold rising from $1072 at New Year to $1277.50 at the daily London benchmark auction, none of the 31 has yet seen gold touch their lowest price forecast.
Gold’s daily average-to-date stands at $1161, unchanged from 2015’s overall figure and more than 5% above the 31 gold analysts’ average full-year 2016 forecast.
