Gold price forecast to decline in 2015

Analysts predict that the strengthening U.S. dollar and increase in interest rates will drive a drop in the metal’s per-ounce price this year.

Brecken Branstrator brecken.branstrator@nationaljeweler.com

New York--Though gold is expected to decrease in price again throughout the year, 2015 could end with a slight uptick, setting the stage for a price recovery next year.

London-based analyst Andrew Leyland, the manager of precious metals demand at Thomson Reuters GFMS, told National Jeweler that they are predicting an average gold price of $1,170 per ounce this year.

He also noted that gold has gotten off to a very strong start. The metal’s price was up to $1,288 per ounce at press time on Wednesday, according to Kitco.com.

In addition to making its own prediction, Thomson Reuters also polls analysts and traders to find the average forecast for 2015. The mean forecast from the 38 different contributors, including its own, was $1,234 per ounce.

Leyland said that the key reasons the average per-ounce price of gold is forecast to fall from its high start this year and from 2014’s annual average has to do in part with the strengthening of the U.S. dollar.

A stronger American economy in general also is expected to contribute, compared with weaker economies in Europe and Japan and a slowdown in some of the emerging markets--Brazil, China, and a big slowdown in Russia owing to the falling oil prices and Western sanctions--as well as an expected increase in U.S. interest rates.

The London Bullion Market Association also did a forecast survey, with 35 analysts representing 31 different companies participating.

Results found that many participants think that the price of gold essentially will stay flat in 2015, with an average of $1,211 this year, a number not too far off from what the Thomson Reuters GFMS poll has predicted.

Examining the possible extremes for the next 11 months, Leyland said they predict gold could dip as low as $1,050 and as high as $1,340. “We expect the first quarter of the year to be the strongest. You quite often get a bit more movement in the first quarter and strength as people re-weigh their portfolios at the beginning of the year.”

With the recent news that the Swiss have unlinked their currency from the Euro and people seeing that the Swiss Franc has a little more volatility to it, more people are putting their money into gold, sending the price higher this month.

But with a significant sell-off expected in the middle of the year, the second quarter is predicted

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to be the weakest in terms of gold pricing, possibly carrying into the third quarter. And the year could end with a slight pick-up, paving the way for a recovery next year.

“I think most people view this as being the bottom of gold,” Leyland said. “We’ve had a couple years of decline now. Most people think that gold prices will stabilize and increase post-2015, but there’ll probably be one more price movement lower.”

According to a recent report on Kitco.com, Goldman Sachs has similar thoughts, noting in a report that though it expects prices to remain stable in the first quarter, it believes they will fall again in the second and third quarters, and could even continue downward through 2016.

“Net, absent a reversal in the U.S. and global recovery, we expect only limited further upside to gold prices despite the recent European and Swiss monetary shifts, as these are likely already largely priced in,” Kitco quoted the report as saying.

In terms of jewelry demand, Reuters’ Leyland said that while the increase in U.S. jewelry sales in 2014 was “reasonably weak,” gold jewelry outperformed other categories by a significant amount.

This is due to a number trends that are likely to continue in 2015--people are spending more disposable income on jewelry, and there also has been a movement by quite a few retailers to promote yellow gold jewelry.

Additionally, because gold prices have come down and the 2013 prices now have filtered into the U.S. system, manufacturers can move away from plated gold products or 10-karat gold products back into karat gold, particularly 14-karat gold.

Brecken Branstratoris the senior editor, gemstones at National Jeweler, covering sourcing, pricing and other developments in the colored stone sector.