After three straight years of losses, analysts are finally prepared to say gold prices have found a bottom, with rising prices seen this year and next as concerns over the pace of U.S. monetary policy tightening fade.
Gold analysts polled by Reuters have hiked their forecasts for the precious metal by nearly $100 an ounce since the start of the year after it posted its biggest quarterly rise in nearly 30 years in the three months to March.
The survey of 30 analysts at banks and trading houses carried out this month returned an average 2016 gold price forecast of $1,209 an ounce, up from $1,118 in a similar poll in January. Last year, prices averaged $1,159 an ounce.
They are expected to rise steadily this year, peaking at an average $1,250 an ounce in the fourth quarter, the survey showed, before extending gains to average $1,300 an ounce in 2017. That would be its highest annual average since 2013.
“The chief supportive factors are the shift in Fed stance, the weaker dollar and the prospect of inflation,” Macquarie analyst Matthew Turner said. “The first two have raised the base price, the third is why we expect higher medium-term prices.”
Gold has already climbed 16 percent so far this year as expectations for an imminent hike in U.S. interest rates faded. Gold is highly sensitive to rising rates, which lift the opportunity cost of holding non-yielding assets, while boosting the dollar. Gold is also a traditional hedge against inflation.