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D E C E M B E R / J A N U A R Y 2 0 1 5
Gold and silveR
Gold and silver's recent steep drop in price underscores
the fact that from the investment demand perspective, the
bears currently control the prevailing market sentiment,
although there are hints that this might be changing a lit-
tle. Since March's high of US $1,360/ounce, gold dropped
to its year-to-date low of $1,132.50/ounce (on November
6). It then reversed and rose about US $50/oz by November
8. Silver has taken a similar trajectory, hitting its year
high of US $22.05 (in late February) and bottoming out at
US$15.28/oz on November 6th. As of November 10, silver
was US $15.65/oz.
The most recent negative catalyst occurred after the US
Federal Reserve announced that it ended its bond-buying
program, effectively cutting demand for gold as a hedge
against inflation and driving the US dollar higher. Gold
then hit a four-year low after Republicans gained control
of the US Senate and news broke that the Bank of Japan
would add more stimulus to its economy (further strength-
ening the US dollar).
As of this writing in mid-November, gold investors have
seen $5.9 billion wiped from the value of ETF products over
the past two weeks. Edward Meir, of INTL FCStone, said,
"gold is again confronting the specter of a stronger dollar,
rising equity prices and tame inflation, a trifecta that does
not bode well for price prospects going into 2015."
BMO Capital Markets expect a "prolonged period of
sub-US $1,200/oz gold prices. Analyst, Jessica Fung, com-
mented in an October report that she expects "many gold
producers' equities will struggle, especially those with
higher cash costs and/or high debt loads." Fung went on
to state that she believed "gold, silver and platinum prices
will remain under considerable pressure due to expecta-
tions for the US dollar to continue strengthening."
As a result, BMO lowered its 2015 gold price to US
$1,190/oz and US $1,238 in 2016.
by Thomas Schuster
OutlOOk 2015
for commodities
