The ABN Amro revised their gold price forecast for 2016 from $900 to $1.300 per troy ounce. The upward revision is remarkable, because the bank held a negative stance towards gold for the past couple of years. As recently as December last year, precious metals analyst Georgette Boele was still convinced the gold price would find a bottom at around $900 during 2016. In her forecast for this year, she wrote about the downward pressure on gold because of the expectation of more rate hikes by the Federal Reserve.

abn-amro-logoBoele explained she was caught by surprise by the sudden turmoil in the financial markets, which painted a bleak picture for the state of the world economy in both the United States and in the emerging markets around the world. Boele is expecting more trouble ahead for those countries relying on the export of commodities.

Interest rates

She also revised her expectations regarding the Federal Reserve monetary policy. The probability of a rate increase by the Federal Reserve diminished substantially because of the downturn in the stock market and the sudden move to safe havens like precious metals. With higher interest rates, buying gold becomes less attractive, because the yellow metal doesn’t yield any interest or dividends.

Expectations of rising interest rates drove the price of gold down to the lowest level in more than five years, but now the outlook has changed. Falling share prices and the exceptionally low price of oil suggest that the global economy is growing at a much slower pace. As a result, banking stocks are under even more pressure, losing 20% on average since the start of 2016.

Gold price moving up

The price of gold has risen more than 15% this year, a strong rally making it the best performing commodity of 2016 so far. The sudden price increase from the lowest level in five years caught analyst Boele by surprise. In an explanation for Bloomberg she said: “Having been long-standing bears we have now turned bullish on precious metal prices. Our new scenario sees a longer period of weaker global growth.”

She also revised her 2016 forecast for other precious metals. From $15,00 to $16,50 per troy ounce for silver and from $900 to $1.050 for one troy ounce of platinum.

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ABN Amro was expecting $900 gold in 2016 just a few months ago

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This article is provided by Goudstandaard.com