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Updated 12:02 17/08/18

LBMA releases indecisive 2018 forecast for precious metals

Liam Sheasby

By Liam Sheasby, News Editor

02 Feb 2018

The London Bullion Market Association has released its forecasts for precious metal markets in 2018, with expert opinion divided on whether prices will rise much or not, and how stable these rises will be.

The organisation is for over-the-counter gold and silver traders (such as ourselves) and acts as a representative, producing a Good Delivery List of approved gold and silver that has reached a high standard.

Each year, the LBMA has industry experts from members and other financial institutions contribute to their annual predictions. They then publish their estimations online, which for 2018 you can view here.

The factors:

Three factors will drive the precious metal markets in 2018: the US real interest rates (which in turn affect the US Dollar), geopolitical factors, and the pace of global economic growth and whether this continues.

The difficulty for experts this year is predicting which of these factors will have the greatest impact, for example, North Korea’s missile tests last year class as a geopolitical factor. These tests were swiftly followed by a rise in global demand for gold and a price increase because of this demand. If South Korea and China manage to convince North Korea to cease their testing in 2018 then this will remove that factor from impacting prices, leading to presumably more stability.

However, many institutions are forecasting that the US Federal Reserve will raise interest rates three or four times in 2018. A rise in the UK in recent months shored up the value of the Pound, which has seen gold prices in GDP stay relatively stable. In the US they’re awaiting further interest rate rises, which is why we’re currently seeing the price of gold in Dollars rise to nearly $1,400 per ounce.

Gold:

The LBMA predicts gold will, on average, stay around $1, 318 per ounce, with a flexibility range of $390. This flexibility shows the uncertainty about the yellow metal and its demand in 2018; with the world economy performing at the best growth rates seen for a decade it’s to be expected that people will invest primarily in the stock markets but keep some wealth to one side in the form of gold, but if the stock markets don’t stop their rampant upwards trend then all eyes will be on that at the expense of gold while investors take advantage of the bull run (boom period).

Silver:

Silver is currently priced at $16.75 an ounce, or £11.85. The average is predicted to rise by just over a dollar, with a high of $23 and a low of $14 estimated by the experts. 2018 has been predicted to be the year that silver finally performs, after six years of pessimism. Even a modest rise for the year would break the trend, but prices were initially expected to grow higher this year with the rise in demand for silver as an electrical conductor in solar panels and electric car manufacturing. This has been toned down a little since the US Government announced solar panel tariffs against China and South Korea, but the global demand shouldn’t be hit too hard by these changes.

Platinum and Palladium:

2017 was a bumper year for palladium due to the demise in demand for diesel cars, following the false emissions scandal that hit Volkswagen and other companies a few years before. Petrol has primarily filled the void in demand left by diesel cars, but new makes are using much better catalytic converters to reduce pollution from exhausts, and these exhausts use palladium for the purification process.

Prices are expected to struggle following this sharp rise last year, down by around 1.5% in 2018, but this loss is acceptable given the surprise growth in 2017.

In comparison, platinum is estimated to go up 3.1% this year. Price forecasts are at an average of $1,000 / £707.74 per ounce, with another large range – this time $518 dollars. The split opinions show here just like with gold and silver. If the precious metal market is popular then people will split their interests, but when it quietens down people often stick with gold and silver and neglect platinum, and with a loss of demand comes a drop in price.

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