Credit Suisse Group AG (CS) analysts recently lowered their 2017 gold forecast, pointing to slowing sales of exchange-traded funds (ETFs) and speculation surrounding how the election could impact interest rates. These analysts cut their full-year forecast to $1,338 per troy ounce from $1,438 per ounce, according to Barron's.
Sales of gold-based ETFs, for example the SPDR Gold Trust (GLD) and iShares Gold Trust (IAU), have fallen 7% since November 8. In addition to this flagging activity, the precious metal's price has dropped up to 8% after rising to $1,340 per ounce that night.
Gold prices could face further headwinds going forward, as rising bond yields and expectations of Federal Reserve (Fed) interest rate hikes may drive investors away from the precious metal. (For more, see also: What Drives the Price of Gold?)
While many market observers have lauded gold for its value as a safe haven, the commodity does not make interest payments like many other risk-off assets, reducing its appeal as broader interest rates push higher. Market observers have repeatedly cited the Fed as potentially impacting gold prices going forward, but central banks in other nations could also play a role, according to analyst Tim Enneking.
"With quantitative easing looking to ease globally, defensive investments like gold are becoming less desirable," said Enneking, managing director of Mana Companies Asset Management. (For related reading, see: 8 Reasons to Own Gold.)
Even though the Credit Suisse analysts recently reduced their full-year forecast, they still predict that gold prices will push higher in 2017. The analysts pointed to favorable supply-demand fundamentals when forecasting that the precious metal's price would average $1,275 during the first quarter and reach $1,400 per ounce in the fourth quarter, more than $200 above spot gold's price of roughly $1,170 an ounce at 4:30 EST on December 8, according to Kitco figures.