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BNP: Gold price will average in triple digits next year

Only three bars

On Thursday gold for delivery in April managed to eke out a slight gain to close at $1,151.90, up $1.30 from a four-month low hit yesterday.

That gold has managed to stay above the crucial $1,150 an ounce support level is a relief to gold bulls. The metal closed below this level early November, but soon bounced back.

For a sustained period of sub-$1,150 gold you have to go back to April 8, 2010.

Gold’s resilience is the all the more remarkable since it came into the teeth of a rabid dollar. Gold historically has inverse relationship to the value of the USD.

Overnight the greenback surged above the 100-mark against the world major currencies for the first time since April 2003, before retreating just below triple digits during normal trading in New York.

That compares to a record low of 71.6 in April of 2008 and a record high of 164.72 in February 1985 when the price of gold bottomed at $284.25 an ounce.

The strong dollar coupled with rising interest rates in the US which raises the opportunity costs of holding gold as the metal produces no income, are high on the list of reasons analysts are calling for further weakness in gold.

France-based bullion bank BNP Paribas released forecasts for average prices this year and next that sees gold sliding back into triple digit territory for the first time since September 2009.

Platts News reports BNP sees a 2015 average of $1,160/oz and $975/oz in 2016 according to a research note on Thursday:

“Future policy action by the US Federal Reserve remains high on gold’s agenda. It will continue to dictate the pace at which the dollar appreciates (and official sector demand for gold declines) and accordingly how much downward pressure will be exerted on gold,” BNP analysts Harry Tchilinguirian and Stephen Briggs said.

The only near-term positive the pair predicted is that any hike in interest rates in the US could be put on hold for the time being, or postponed until later in 2015.

“On the physical side … further strength in the dollar stands in the way of import demand in [certain] key consuming countries, such as Turkey and India,” the analysts said.

The spot price of gold in New York, which does not trade in nearly the volumes of the most active futures contract, is suffering its worse streak losing streak in 17 years.

According to Bloomberg it was the ninth straight session of losses with gold for immediate delivery falling slightly to settle at $1,153.73 on Thursday. The last time gold was beaten back for such a stretch of time was January 1998.