Reuters GFMS sees gold prices averaging at $US1,259 an ounce in 2017, around $US60 an ounce above the close on Friday in New York of just over $US1,193 an ounce.
The contract fell 1.4% over the week.
March silver climbed by 28.6 cents, or 1.7%, to $US17.136 an ounce, erasing its weekly loss. It was up about 0.6%. And Comex March copper ended at $US2.69 a pound, up 1.7 cents, or 0.6% – to finish around 2.5% higher for the week.
But gold is the focus and in its first gold market outlook for 2017, Reuters GFMS said gold prices have started 2017 by making up some of the losses from late last year. However, the "US dollar is likely to remain a substantial headwind to further price rises, at least in the first half of 2017.”
"Furthermore, there are few indications that physical demand from Asia is set to pick up just yet. However, as the year progresses there is a growing likelihood of safe haven flows helped by either or both U.S. and European geopolitics.
"In Europe an election result, perhaps in France or the Netherlands, might be responsible, increasing the chances of a country leaving the eurozone, while in the United States a more unorthodox approach from President Trump could increase such flows. Thus we forecast gold to average $1,259 per ounce in 2017.”
A year ago Reuters GFMS forecast that gold prices, currently near $US1,100 an ounce (in January 2016), recovering to above $US1,200 an ounce by year-end, and averaging $US1,164 an ounce in the full year. Gold demand is expected to grow by 5%.
Comex gold futures rose 9.4% last year while demand fell for reasons outlined below, but the price forecast was pretty spot on.
Reuters GFMS said the gold market saw its largest surplus since 2005 in the final quarter of last year, as demand from major consumer India wilted and investors sold out of gold-backed exchange-traded funds as the Fed lifted interest rates, indicated there will most probably be up to three more rises this year, US bond yields jumped and the greenback rose in value.
The rise in unsold metal in the final months of last saw overall physical gold demand fall 20% in 2016 to its lowest since 2009.
Buying of jewellery, coins and bars, plus official sector and industrial demand, fell to 3,349 tonnes last year from 4,184 tonnes in 2015, the analysts said, the lowest in seven years.
That helped lift the net surplus in the gold market to 1,176 tonnes, up from just 220 tonnes in 2015 and the biggest physical surplus this century. GFMS said that demand was hurt towards the year-end by gains in the dollar after Trumps win in the US Presidential poll and a sharp drop in Indian demand after Prime Minister Narendra Modi’s withdrawal of some denominations of bank notes sparked a cash crunch in the fourth quarter. That move was not seen by anyone and continues to worry gold and sliver investors.
“The U.S. dollar is likely to remain a substantial headwind to further price rises, at least in the first half of 2017,” GFMS analysts said. “Furthermore, there are few indications that physical demand from Asia is set to pick up just yet.”
But positives for the metal this year include growing political tensions linked to the new Trump presidency in the United States, the progress of Britain’s departure from the European Union, and a host of elections in Europe may spark renewed gold demand later in the year.
“Physical demand was at a seven-year low in 2016, and while it did rise 29% quarter-on-quarter in the final three months of 2016, this was arguably a disappointing result, as demand was still down 10% year-on-year despite the slump in prices,”GFMS analysts wrote.
"Other things being equal, physical demand could easily have been in the order of 250 tonnes higher in the final quarter. The main themes were India, China and the U.S. dollar. “ he latter also played a crucial role in ensuring that scrap supply was down only marginally year-on-year despite the significant quarter-on-quarter fall in dollar prices."
