Gold Forecasts Turning Bullish; Gold at $1,500 by 2017

Many global banks and precious metals analysts are now forecasting that gold has seen its bottom and will be moving higher in the coming years. The timeframe varies from institution to institution, but the consensus seems to be that the price of gold in dollars will rise significantly after 2015. Very few expect it to move dramatically lower this year.

The German Commerzbank published the results of a commodity survey at the beginning of April, showing overwhelming bullishness for precious metals in the long-term. For investment bankers, “long-term” means next year. For investors interested in buying physical gold, that means they should make plans for investing in bullion very soon.

Commerzbank reports that 62% of banks expect higher gold prices in 2016. More than half of the polled banks expect higher prices in the next 6 months.

The possibility of the Federal Reserve raising interest rates weighs heavily on all forecasts. Some economists continue to believe a rate hike is inevitable in 2015. Higher interest rates are generally considered bearish for gold in the short-term, because it would indicate that the US economy is truly recovering.

However, Peter Schiff and other economists predict that a rate hike would devastate the stock market, which in turn could be very bullish for gold. Peter doesn’t think the Fed will let this happen, because artificially high stock evaluations are the only proof of US economic strength. The Fed won’t risk popping this bubble and will likely keep rates at or near zero for the foreseeable future.

MarketWatch reports that Bank of America now shares Peter’s beliefs that the US economy is too weak to support a rate hike. They predict gold is on the cusp of tipping into a bull market for this very reason:

They argue the US economic recovery, however, isn’t as robust as thought and that the Fed’s policy tightening will be delayed and relatively muted, which will then allow gold to break out of its recent range and rise to $1,500 an ounce by 2017.”

Other analysts see a rate hike from the Fed, but expect it to be so gradual that other global factors will play a larger role in pushing the gold price higher. As Standard Chartered puts it:

The extent of quantitative easing outside the US, geopolitical developments, India’s deregulation, consumer demand from China and problems within the euro area will all be supportive for gold… When attention turns to the likely nature of the [rate hike] cycle – i.e. very gradual indeed – we believe that there will be a base for a more rapid rise in gold prices.”

Metals Focus has a similar forecast. While their analysts are cautious about gold in the short-term, they think the bear cycle is very close to its end. In a recent report, Metals Focus writes:

From 2016 onwards, there are several plausible candidates waiting in the wings to provide the spark for a renewed gold bull market… They include potentially gold-friendly developments in debt, inflation, foreign exchange, commodity and equity markets and the scope for a far more malign environment for international relations to develop over the next few years.”

UBS, the Switzerland-based global financial services company, also thinks that the Fed’s tightening is going to be delayed. In fact, according to Mineweb, UBS analyst Julian Garran is predicting more quantitative easing, just like Peter Schiff. Here’s what he wrote in a letter to UBS clients:

That in turn is limiting the Fed’s ability to tighten policy and may induce it to ease in the future. We think the Fed has started to recognise that pressure with its dovish backtracking at the March meeting last week.”

The biggest mistake physical gold investors make is trying to perfectly time the market. We recommend physical precious metals for long-term savings, which means that fluctuations of even $50 or $100 in the price of gold are relatively insignificant in the big picture. Many investors today regret that they didn’t buy gold for less than $500 an ounce in 2005. In another decade, we expect the same investor remorse for the price levels we’re seeing this year.

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