CIBC boosts gold price forecasts. Says Trump Presidency would be more-bullish for bullion

Read full post at forexlive.com

In
a
report
released
late
yesterday,
CIBC
significantly
raised
its
gold
price
forecasts,
seeing
a
more
bullish
outlook
for
bullion,
especially
in
the
event
of
a
Trump
presidency.

Key
Takeaways:

1. 
   Gold:

   • 
     2024:
     New
     forecast
     is
     $2,290/oz,
     up
     from
     the
     previous
     $2,100/oz.
   • 
     2025:
     New
     forecast
     is
     $2,600/oz,
     up
     from
     the
     previous
     $2,000/oz.
   • 
     2026:
     New
     forecast
     is
     $2,400/oz,
     up
     from
     the
     previous
     $1,900/oz.
   • 
     2027:
     New
     forecast
     is
     $2,200/oz,
     up
     from
     the
     previous
     $1,875/oz.
   • 
     Long-term
     (2028
     and
     beyond):
     New
     forecast
     is
     $1,975/oz,
     up
     from
     the
     previous
     $1,875/oz.

2. 
   Silver:

   • 
     2024:
     New
     forecast
     is
     $28.75/oz,
     up
     from
     the
     previous
     $24.97/oz.
   • 
     2025:
     New
     forecast
     is
     $34.50/oz,
     up
     from
     the
     previous
     $24.00/oz.
   • 
     2026:
     New
     forecast
     is
     $32.50/oz,
     up
     from
     the
     previous
     $23.50/oz.
   • 
     2027:
     New
     forecast
     is
     $30.50/oz,
     up
     from
     the
     previous
     $23.00/oz.
   • 
     Long-term
     (2028
     and
     beyond):
     New
     forecast
     is
     $26.00/oz,
     up
     from
     the
     previous
     $23.00/oz.

3. 
   Market
   Drivers:

   • The
     main
     driver
     for
     the
     change
     is
     central
     bank
     demand.
     “We
     do
     not
     see
     central
     bank
     demand
     materially
     dissipating
     any
     time
     soon.”
   • “Demand
     for
     gold
     remains
     strong,
     with
     central
     banks
     continuing
     to
     purchase
     gold
     driven
     by
     a
     longstanding
     strategy
     of
     USD
     diversification
     and,
     in
     some
     cases,
     efforts
     to
     sanction-proof
     FX
     reserves.”
   • Retail
     demand,
     especially
     in
     Eastern
     economies,
     remains
     robust
     as
     investors
     seek
     wealth
     preservation
     amidst
     soft
     stock
     and
     real
     estate
     markets.
   • Central
     banks
     such
     as
     China,
     Russia
     and
     India
     possess
     gold
     holdings
     at
     1-3%
     of
     foreign
     exchange
     reserves,
     well
     below
     European
     central
     banks
     at
     over
     10%,
     a
     level
     PBoC
     has
     in
     the
     past
     repeatedly
     noted
     it
     sees
     as
     more
     ideal.
     Gold
     slumped
     this
     week
     on
     data
     showing
     the
     PBoC
     wasn’t
     buying
     but
     they
     expect
     that
     to
     reverse
   • ETFs
     have
     been
     a
     weak
     link
     but
     despite
     recent
     outflows,
     they
     are
     expected
     to
     reverse
     course
     with
     Fed
     cuts

4. 
   US
   politics:

   • A
     Trump
     presidency
     would
     be
     particularly
     bullish
     for
     gold
     due
     to
     policies
     favoring
     higher
     deficits,
     tariffs,
     and
     potential
     pressure
     on
     Federal
     Reserve
     independence.
     Simply
     extending
     the
     maturing
     tax
     cuts
     would
     add
     US$3
     trillion
     to
     the
     deficit
     over
     the
     next
     ten
     years.
   • While
     a
     second
     term
     for
     Biden
     is
     also
     seen
     as
     positive
     for
     gold,
     Trump’s
     approach
     could
     create
     a
     more
     inflationary
     environment,
     further
     boosting
     bullion
     prices.

5. 
   Silver
   Market
   Outlook:

   • Industrial
     demand
     for
     silver,
     particularly
     in
     solar
     and
     electrification
     sectors,
     is
     expected
     to
     rise,
     adding
     to
     a
     supply
     deficit.
   • The
     gold-to-silver
     ratio
     is
     projected
     to
     contract,
     benefiting
     silver
     prices.

Quotable:

If
we
marry
the
different
starting
positions
(fiscal,
monetary
and
valuation)
with
the
policies
articulated
by
Trump
(bigger
deficits,
higher
tariffs,
less
Fed
independence),
it
is
easy
to
see
a
better
environment
for
gold
prices
if
Trump
repeats
in
2024
–
albeit
Biden
does
not
seem
much
more
restrictive
on
deficits
and
tariffs.
Given
neither
candidate
seems
concerned
on
fiscal
positions
coupled
with
a
Federal
Reserve
(and
to
some
extent
all
central
banks)
seemingly
more
comfortable
with
higher
structural
inflation,
we
believe
a
Biden
second
term
shouldn’t
be
a
negative
for
gold
prices;
but
if
Trump
is
re-elected
(and
follows
through
on
his
policy
positions),
the
already
impressive
rally
in
gold
prices
likely
continues
into
2025.

Note
that
gold
didn’t
do
well
in
the
first
Trump
Presidency
but
CIBC
notes
that
the
fiscal
situation
is
vastly
different
now
with
a
deficit
almost
four
times
as
large
as
it
was
in
2016
and
interest
payments
eating
up
15%
of
revenues
compared
to
6%
in
2016
(and
on
the
way
to
22%
in
2033).