Gold to accelerate amid economic, political concerns - CPM Group

Gold price rises will begin to accelerate in H2 as investors flock to the metal amid global economic and political concerns, according to CPM Group.

"Our expectation is that the price of gold will rise modestly in H1 and begin to accelerate in the second half of this year as economic and political issues start to increase investor disenchantment, scepticism and concerns about a wide variety of topics in the US, Europe, Russia and globally," managing partner Jeffrey Christian told the company's 2017 Gold Yearbook Launch.

The longer-term outlook for the yellow metal is also positive.

"We would not be surprised to see annual average prices reach record nominal levels by 2020-21, primarily based on the idea of investors buying large amounts of gold due to political, economic and financial concerns," Christian added.

"Central banks will also continue to buy gold and supply will decline beyond 2019."

SLUGGISH GROWTH

CPM Group expects global economic growth to remain muted in the coming years.

In the US, a shallow recession is forecast for 2018, with annual GDP growth remaining well below 3% for the foreseeable future.

"We don't see the US growing itself out of its debt and deficit problems," Christian told the event.

INFLATION, US DOLLAR

Inflation will also remain under control, with rises in the US dollar over, although sharp drops are not expected.

"Investors are less interested in the dollar, stocks and industrial metals used in the US infrastructure spending program, and more interested in gold and silver as financial assets and portfolio diversifiers," he added.

DEMAND

Investor demand is likely to remain flat from last year at about 27Moz in 2017, while increased buying in China will partly offset declines in India, with the latter due to government efforts to curb gold demand, director of research Rohit Savant said.

The bullish view contrasts with that of analysts at ABN AMRO and BMO Capital Markets, who expect prices to remain broadly range-bound in 2017.

Gold closed at US$1,257.25/oz in London, down 30 cents from the previous day's four-month high, with silver unchanged at US$17.94/oz.

Gold is up from December's US$1,151.40/oz average, with silver up from US$16.38/oz the same month.