Precious metals sentiments improve in the last quarter of 2018

After the annual loss in three years, yellow metal sentiments improved in the last month of 2018, where analysts are forecasting gains in 2019. In its 2019 Outlook - Capital Economics said the bull market is around the corner for the precious metals, where gold continues to show solid recovery in the month of Dec 2018. Yellow metal traded 0.90 per cent above at $1,267.70 during the trading session, and analysts forecast the price to increase to $1,300 an ounce in 2019, which will be followed by $1,400 in the year 2020. 

French bank Natixis is highly optimistic on silver heading in this year to push to a high $18, averaging at $16 an ounce. 

Dutch bank ABN AMRO forecast the price to gain to $18 an ounce, to average at $16.60 an ounce.

This year the demand for silver was low where the US Mint sold 14 per cent less (15.4 million) one-ounce American Eagle Silver coins in the year as compared to 2017, and demand was down by more than 67 percent as compared to three years ago. 

Fed monetary tightening policies is one of the main reasons for the growing interest of investors in such metals, where the forecasts by Capital Economics states - in 2020, Fed may start rate cuts, which can improve the pricing further. 

Another support for such metals comes through weaker US dollar, which raises fears of US economy downturn in 2020 amidst tightening monetary policies.  Economists predict the rates of yellow metal to gain over $1400 by the end of 2020. Issues concerning global growth, Brexit, trade issues and currency fluctuations can lead to increase in demand. 

Gold is trading 16 per cent higher since Brexit vote was passed, in terms of, British pounds and similar conditions can be seen in South East Asian markets. 

Gold vs. Dollar 

The decline of gold is directly related to dollar gains. The two key factors which resulted in decline in 2018 are the US equities and the dollar rate. It is believed the equities will not be offered tax cuts by the US administration and the US currency may suffer due to Fed interest rate hikes in the year. 

Higher market volatility, political instability in some countries, economic instability and trade issues will lead investors to seek diversification in the metals. The economic instability in Europe and inflation related to the protectionist policy raises the risk of market volatility in the coming years. In the emerging markets, the reforms and changes in policies may lead to boost in precious metal demand in various forms - technology, jewelry as well as long term savings. 

Silver may gain in the next year 

Silver is not just an industrial metal, it may become the new monetary metal, which can outperform gold in 2019 amidst dollar weakness and Fed tightening policies. 

Despite lackluster performance in 2018, there is optimism in the precious metal sector where the investors are also buying silver, which can get a reversal in the next year, especially, if Gold price turns around. Currently, gold silver ratio is at 25 year high at 84.74 points, historically, it was averaging at 50. 

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