Citi Forecasts Gold to be Under Pressure in 2017

Citi Research looks for gold to come under pressure in 2016, with a full-year average price forecast of $1,160 an ounce, and suggests that platinum group metals could outperform the rest of the precious-metals complex.

Republican Donald Trump’s victory in the U.S. presidential election has shifted U.S. dollar and interest-rate expectations higher, analysts said. This in turn points to a bearish gold outlook due to the inverse relationships between the markets.

“Supply fundamentals are little changed while demand hangs in the balance as Chinese and Indian retail trends are at an inflection point,” Citi said in a report released late Sunday. “In the absence of strong structural trends, we expect gold price pain before gains.”



Citi sees gold easing to a second-quarter average of $1,135 before recovering to $1,180 in the final three months of 2017. Silver is seen averaging $15.50 next year.

The bank sees a 65% chance of its base-case scenario, which is for the Federal Reserve to hike interest rates once in December and possibly two times in 2017, if macroeconomic data remain strong.

“The strong U.S. dollar outlook post-Trump and back-up in bond yields is the main driver of our bearish price outlook for 2017,” Citi said. “But geopolitical tensions — including risks of Euroland breakup —
persist, with a slew of elections and referendums on the horizon. But a potential inflation bid may buttress levels above $1,100/oz.”

via Kitco

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza