The Phaserl


SocGen’s ultra bearish gold and silver outlook

by Lawrence Williams, :

Analysts at the French Bank Societe Generale (SocGen) in their latest research report have forecast that the gold price, having given away all its early year gains, was headed sharply lower, as it saw the dollar continue its gain in strength. They thus expected the bear market in gold to continue further and saw the price as falling to average only $925 an ounce between 2016 and 2019. The timing of this report was perhaps unfortunate in that the forecast for a virtually immediate downturn in gold, together with dollar strength, predated the events of the past few days, which has seen the reverse occur. Gold bulls will be fervently hoping that the bank’s analysts are equally incorrect in their forecast of gold’s longer-term prospects.

While the bank actually raised its average forecast for the current year to $1,130/oz from its earlier $1,025/oz because of the higher than expected gold price performance during Q1, it expects the price to only average $1,150 during Q2, falling gradually to $1,050 by Q4.

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2 comments to SocGen’s ultra bearish gold and silver outlook

  • Ed_B

    Since the current price of gold, near $1200 an oz. is right at the average production cost for this metal, saying that it will drop nearly $300 from that seems pretty ridiculous, IMO. The BIG drop in oil prices has resulted in about a 20-30% drop in the cost of mining gold and silver, depending on the mine and its location. This has helped miners considerably but they are still in pretty sad financial shape. The really nasty part of this is that the miners are so cash strapped now that none of them seem to be exploring new areas or developing new mines. This does not bode well for their future earnings. Oil prices WILL recover at some point and when they do, costs will move higher and perhaps substantially higher.

    As to the apparent strength of the US$, this is 100% due to the dollar floating against the yen, euro, and US pound. All three of these currencies are in worse shape than the US$, making the US$ APPEAR to be strong when it really isn’t. For REAL strength, US industrial production would have to be rising instead of falling and US worker productivity would have to be increasing. Also, the US Gov would have to be living within its income and implementing a plan to pay down the national debt. None of this is happening either, so it is ludicrous to be thumping our chests about the “strength” of the US$. It is the best looking horse in the dog food maker’s corral but that’s about it.

  • Ed_B

    Oh, and one other thing. Who TF is Soc Gen to be dumping on PMs? Last I heard, that bank was in absolutely miserable financial condition, unable to pass even the watered down EU bank strength tests. Yeah, I’ll take PMs over Soc Gen shares any day of the week and twice on Sunday.

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