Gold will end the year higher, spurred by faster inflation and political tensions in Russia, Syria and North Korea, according to Intesa Sanpaolo SpA, the best forecaster for the metal last quarter.
Prices could take a v-shaped path this year, with a swoon coming mid-year as the Federal Reserve raises U.S. interest rates, said Daniela Corsini, an analyst at the bank. Gold will likely bounce back by year-end, reaching a high of $1,350 an ounce in the fourth quarter, she predicted.
That would leave bullion at the highest level since September. Prices have risen 12 percent this year, supported by inflation concerns and a mix of geopolitical worries, including North Korea’s nuclear ambitions and U.S. airstrikes in Syria and Afghanistan.
“Markets will surely remain nervous about this uncertainty,” she said by phone from Milan on Tuesday. “And if economic data in the U.S. remains strong, then gold will regain its role as an inflation hedge.”
Bullion for immediate delivery dropped 0.3 percent to $1,286.54 an ounce at 12:22 p.m. in Singapore, according to Bloomberg generic pricing.
Silver could climb to $19 an ounce by year-end, compared with Wednesday’s price of $18.2395 an ounce, according to Corsini. The metal has gained 15 percent this year.
Platinum and palladium are likely to face pressure from a slowdown in car demand in the U.S. and China, she said.
For the physical gold market, India will see strong demand, while speculators in China maintain a preference for equities and other commodities, Corsini predicted. Demand in India, the second-largest gold market, suffered a blow in 2016 after the government withdrew larger bank notes from circulation.
In Europe, upcoming elections in France, Germany, and the U.K. will provide an impetus for gold buying.
The Indian “impact of the demonetization scheme has run its course, and we had very strong imports in February and March,” she said. “ETF demand will be correlated with safe-haven demand in Europe.”