Record 2025 Forecast for Gold and Silver But Prices Sink from 5-Week Highs
Friday, 12/13/2024 14:30
GOLD and SILVER prices continued to fall in Asia and London on Friday, sinking 2.4% and 5.7% respectively from yesterday morning's 5-week Dollar highs but forecast by leading analysts to extend this year's steep bull markets into 2025.
With gold dropping as low as $2660 per Troy ounce, silver more than erased this week's prior gains at $30.50 as the US currency held near 2-week highs on the FX market ahead of next Wednesday's Federal Reserve decision on interest rates.
Expected to deliver another 0.25-point cut to overnight interest rates, next week's US central bank announcement will also bring
the Fed's updated 'dot plot' forecasts for the economy, inflation and interest rates in 2025.
"The Fed is not done cutting [but developed-market] inflation has bottomed," says strategist Nicky Shiels at Swiss bullion refining and finance group MKS Pamp, forecasting that gold prices will rise 14% to average $2750 across 2025 while silver rises 23% to an annual average of $36.50 per Troy ounce.
That would mark gold's 6th record annual average in a row and a new all-time high for silver, topping its 2011 average of $35.11 per Troy ounce.
"We expect
silver prices to reach $36 to $38/oz in 2025," said a note last month from Swiss bank and bullion clearer UBS, whose precious metals strategist Joni Teves won the London Bullion Market Association's 2023 Forecast Survey for the more industrially-useful precious metal.
Consensus forecasts among the analysts and traders entering the LBMA's 2024 competition missed this year's average gold price outcome-to-date by 13.4% and silver by 12.1%.
"Global growth will be boosted in 2025," says Shiels at MKS –
winner of the LBMA's 2022 Forecast Survey in gold prices – while "ample global liquidity will extend and look for a home, the US Dollar can weaken in the latter half of the year [and] China has rejoined the reflation party.
"The geopolitical backdrop remains fragile with global policy risk high but markets have been pressure tested this year (well, since Covid!).
"Gold and the S&P500 are on track to both print around 30% gains in 2024, the first time in history" that US stocks and bullion have risen so strongly together, says Shiels.
"Gold is poised for its best annual performance in more than a decade," says a note from the mining industry's World Gold Council.
"Behind this, central bank and investor buying have more than offset a notable deceleration in consumer demand."
Household demand in gold's top 2 consumer markets has weakened sharply on late 2024's new record prices, reflected by dealers asking $9 per ounce less in India than official import prices over the last 7 days, while gold in China has traded as low as a $25 discount to London quotes, also deterring new bullion imports.
"Due to the price rise, demand decreased sharply this week," Reuters quotes Mumbai gold dealer Ashok Jain of wholesalers Chenaji Narsinghji.
"Instead of buying, some investors were even selling gold purchased at lower prices."
With India's Rupee rallying this week from new all-time lows against the Dollar, the Bombay Stock Exchange's Sensex index rose from last Friday's finish to close 4.3% beneath early October's all-time high.
Shanghai's stock market in contrast fell hard on Friday, dropping 2.4% for the day on the CSI300 index – and reversing this week's prior gain despite
China's Communist leadership preparing to weaken the Yuan in 2025 – after new data said bank lending in the world's 2nd largest economy last month lagged analyst forecasts by almost 40% at less than half the figure in November last year.
"Steps ready for stable growth of the economy," says politburo mouthpiece
China Daily, reporting that this week's Central Economic Work Conference in Beijing saw policymakers led by President Xi Jinping "
reaffirm the need to forge ahead with high-quality development in 2025," focusing on domestic consumption rather than technology or other manufacturing exports.
Gold prices for UK investors meantime halved this week's prior gains but held above £2100 per Troy ounce – a new all-time high only 2 months ago – after UK data said gross domestic product shrank 0.1% in October, the reverse of what analysts forecast, as industrial production continued to fall and the world's 6th largest economy recorded its deepest trade deficit in goods exports versus imports since June.
Analysts are now split over the Bank of England cutting UK interest rates again next Thursday in its final decision before 2025, because inflation rose to a 6-month high of 2.3% on the latest CPI data and consumers responding to the BoE's latest survey now foresee inflation running at 3.4% in 5 years' time.
That's the worst 5-year outlook among the UK public since the cost of living leapt towards double-digit inflation for the first time in 4 decades in spring 2022.
“There is a risk that the UK is slipping back into stagflation,” says one economist.
The gold price in Euros also halved this week's prior 4.0% gain to trade at €2534 per Troy ounce as the single currency rallied from yesterday's 6-session lows on the FX market, hit after the European Central Bank cut the 20-nation's cash deposit rate for the 4th time this year in the face of political uncertainty in France and worsening economic data from Germany.
"The German economy is
not only struggling with persistent economic headwinds but also with structural problems," said Joachim Nagel, President of the Deutsche Bundesbank, forecasting a full-year 2024 drop in GDP of 0.2% with next year only managing to reverse that contraction.
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