Gold's top forecaster sees two hikes, weaker prices in 2017

[SINGAPORE] Gold will be on the retreat in 2017 on rosier global economic growth and tighter policy from the Federal Reserve, which will hikes rates twice, according to the most accurate bullion forecaster tracked by Bloomberg in the third quarter.

Bulllion will be at US$1,175 an ounce in the first quarter, US$1,150 between April and June, US$1,125 in the third period and US$1,100 by the fourth, according to a presentation from Barnabas Gan, an economist at Singapore-based Oversea-Chinese Banking Corp, on Friday Spot gold was at US$1,169 at 3pm local time.

Gold has been battered in the past five weeks, paring an annual gain, on expectations for faster growth and inflation when President-elect Donald Trump takes office, and as the US central bank tightens monetary policy. Before next year's predicted pair of hikes, US policy makers will most likely raise rates next week, according to Mr Gan. Bullion's allure has also been undermined by a rally in US equity benchmarks to records.

"With the US Fed most likely to raise interest rates next week by 25 basis points, the firmer dollar is a very, very strong factor to limit any rally," Mr Gan said. Aside from the Fed's decision, the rhetoric markets will be looking for is on the trajectory for rates into 2017, according to Mr Gan.

ABN Amro NV has the same forecast as OCBC, citing rising real Treasury yields as being a "major negative" for bullion.

Still, Commerzbank AG is more bullish, seeing Mr Trump's presidency and the UK's negotiations to leave the European Union as risks that may boost prices, as well as inflation.

BLOOMBERG