Fitch: Gold Price Assumptions Raised amid Global Uncertainty

Fitch Ratings raised its gold price assumption to $1,100/oz from $1,000/oz as uncertainty, driven by negative interest rates in parts of Europe and elsewhere, combined with reduced US rate hike expectations, have driven investment sentiment for gold in first-half 2016.

Our updated global gold price assumptions incorporate upward revisions for all forecast years, reflecting the current market price environment and evidence of price support during the forecast period. Gold prices are expected to continue to be supported by strong retail investment demand, continued central bank purchasing and global financial turmoil.

Price increases will likely be limited due to reduced inflation expectations and slowing Chinese and Indian economies, the two main drivers of jewelry demand. Purchases in these two economies are highly sensitive to price movements, with demand stalling as prices rise, but recoveries in either of these two markets should lead to increased long-term demand.

Gold is a highly financialized commodity, with supply and demand heavily influenced by investment and scrap sales, as very little is used for industrial production. Price forecasting is challenging, as changes in investment demand are driven by perceptions of currency, inflation and geopolitical risk.

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