Gold could trend higher next year

singapore — Gold has its fans for next year, but sparks are probably not going to fly. Even as the Federal Reserve tightens monetary policy and the European Central Bank tapers bond purchases, gold is set to rise marginally as real interest rates stay low and the dollar weakens, according to Bart Melek, global head of commodity strategy at TD Securities Inc. in Toronto. He sees bullion averaging $1,313 an ounce in 2018, about four per cent more than the mean so far this year.

“We don’t expect a big shock from the Fed in terms of rates,” Melek said in a phone interview last week.

“Real rates continue to be quite low by historical standards. That represents a fairly limited rise in the opportunity costs of holding zero-yielding assets like gold. The yield curve is going to be fairly flat as well and that implies a robust precious metals market.”

While bullion has climbed 10 per cent this year, it’s been rangebound since the end of September as the US stock market hit numerous records and optimism grew over President Donald Trump’s tax reform plans. A black swan event in financial markets, a hefty equity correction, or signs the Russian probe is really hurting Trump could all push gold sharply higher, but the outlook seems to be relatively becalmed for now.

Gold has mostly accommodated increases in interest rates this year and will average $1,310 in 2018, said James Steel, an analyst at HSBC Securities (USA) Inc. — Bloomberg