Gold Silver Reports ⇒ Demand from Asia and further contraction in global mine production will prompt gradual recovery of gold prices in 2016, especially in the second half, according to Thomson Reuters GFMS survey. “We expect a slow recovery in 2016 in dollar terms, with the gold price trading above $1,200/oz towards year-end, and averaging $1,164/oz.”
“While gold is likely to remain under pressure for some time, the prospects look brighter for 2016, particularly in H2,” as per the survey.
Firstly, the slowing Chinese growth and the negative outlook for the yuan should benefit gold in the medium term, and once there are clear signs of a price recovery, or at least, stabilisation we should see investors coming back to the market.
The market has been arguably pricing in four U.S. raterises this year. However, given a weak economic recovery and highly accommodative stance of monetary policies outside the United States, we are likely to see only two small rises. This should again strengthen market sentiment.
Total gold supply dropped by 7% in the final quarter of 2015, due to an estimated 4% drop in global mine output, the largest quarterly reduction since 2008, and a shift to net de-hedging, compared with a year earlier.
Physical golddemand rose 2% year-on-year in the fourth quarter of 2015, as a strong pickup in net official sector purchases and a moderate increase in retailinvestment were partially offset by losses in the jewellery and industrial sectors. Jewellery fabrication posted a 2% year-on-year drop, largely on the back of disappointing demand in China, although this was partially neutralised by continued growth in India. ⇒ Neal Bhai Reports