Gold Outlook:Goldilocked with few bears

We anticipate only moderately higher gold prices in 2018 and 2019, based mostly onexpectations of greater safe haven buying and recovering jewelry demand. Tightermonetary policies globally may create headwinds to rallies but are largely priced in.

    A stable USD should not weigh on prices, but may limit the upside. Any increase infinancial market volatility or risks may aid gold. As a result, gold is likely to remainlocked in a trading range of USD1,161/oz to USD1,355/oz in 2018.

    We highlight the following drivers:Tighter G3 rates priced in; less certain guidance/other risks may aid goldTightening by the Fed and other major central banks lends a potentially negativebackdrop for gold but impact is largely priced. However, as rates rise, forwardguidance may become more uncertain (see 2018 – FX & the Fed: Forward guidancecould lose its power, 11 December), which could aid gold demand long term. Anysustained equity market weakness would encourage safe haven demand, as wouldgeopolitical risks and higher global trade tensions.

    Investment mixed, physical demand weakWe look for both ETF and Comex demand to build in 2018. Jewelry purchases andbar demand may increase, but coin sales are weak. Mine output may be plateauingand scrap supply looks limited; central bank demand should increase. The balance ofthese factors, which we update in our detailed demand and supply table, lead us tolower our average price forecasts slightly for 2018 and 2019, and we add a 2020forecast. Nevertheless, we still look for modest upside in gold next year and in 2019.