Gold Price Forecast: Yet Another Analyst Becomes Bullish

Wednesday, August 17, 2016

Throughout the year, we've seen several analysts change their opinions with regard to gold, revising forecasts upward each step of the way. Recently, RBC Capital Markets became the next to join the fray of analysts with bullish forecasts after adding $200 to theirs. Today, we'll talk about the forecast update, why so many analysts are turning bullish, and what we can expect to see from gold ahead.

RBC Capital Markets Increases Gold Price Forecast

Recently, RBC Capital Markets took a big step early this week when they decided to increase their forecast on the price of gold. Analysts at the investment bank have decided to increase their gold price forecast for the precious metal to $1,500 for the years 2017 and 2018. This is an improvement of $200 when compared to the previous forecast of $1,300.

The investment bank gave very clear reasons for their improved views with regard to the price of gold. RBC Capital Markets pointed to the geopolitical and economic risk associated with the Brexit as well as the fact that government bond yields will likely continue on a negative trend. In a release, the investment bank had the following to offer...

The bank explained that the increase was the result of “Elevated geopolitical risk in the U.K./euro zone, increasing systemic risk with increasing negative yields for government bonds and the Fed likely to pursue a more dovish monetary policy.

We reiterate our view that investors should look to gold equities for exposure to gold, especially given the increasing free cash flow generated in the current gold price environment. We recommend that investors focus on operating companies with attractive margins, solid balance sheets, organic growth opportunities and a consistent operating strategy... Our technical outlook suggests that the next gold bull market is under way, and any weakness is viewed as a buying opportunity.”

Why Analysts Are Increasingly Turning Bullish On Gold

At the end of the day, RBC Capital Markets laid it out perfectly. Gold is largely a safe haven investment. This means that when economic conditions are negative, we can expect to see gains in the value of the commodity as investors, consumers, businesses, and even governments use the precious metal as a way to keep the value in their assets safe. This leads to increasing demand and ultimately increasing prices. The effects of the Brexit have been horrible to date, and no one knows how bad it's going to get in the UK and Europe. With more global economic risks, investors are looking for safe havens.

On top of the fact that safe haven demand is growing, safe haven options are shrinking. In the past, government bonds were a great way to go. However, thanks to low central bank interest rates around the world, government bonds aren't attractive anymore. As a result, more and more investors are looking toward gold.

What We Can Expect To See From Gold Ahead

Considering the current state of the global economy, and the turbulence that we're seeing in the market, safe haven demand is likely to increase. Also, with central banks around the world continuing to reduce interest rates, bonds are likely to become less and less attractive. This will likely lead to further gains in the price of gold.

[Image Courtesy of Wikimedia]

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Joshua Rodriguez

Joshua Rodriguez is an avid financial professional. He is the owner and founder of CNA Finance, a partner at Modest Money, and a writer for US News & World Report,, and more! Joshua takes a strong fundamental approach to market analysis and enjoys offering his take on what we can expect moving forward. You can reach Joshua at [email protected].