The gold price should recover in February although it has struggled so far this month, INTL FCStone analyst Edward Meir said.
Gold came storming out of the gate in 2015, peaking at $1,308 at one point and gaining 10 percent in the first three weeks of January.
“There were lots of economic ‘mini-shocks’ that sparked prices higher, with the most significant being the undoing of the Swiss franc’s three-year peg against the euro,” Meir said in a monthly note on Wednesday.
“The backlash this caused has been well documented by now, but what we think is the more important takeaway is just how tenuous central bank policy can be,” he added.
The ECB’s recently announced QE programme and lingering uncertainty generated by the recent Greek elections should provide support, Meir said.
Although the new Greek government is engaged in negotiations with its lenders, which explains the current sell-off in gold, serious issues – and heightened volatility – remain on the cards, he added.
INTL predicted a price range of $1,225-$1,310 this month – spot metal was last at $1,263.80/1,264.60 per ounce.
Silver is typically more volatile than gold and has certain risk characteristics that gold does not due because it is also an industrial metal, the broker said, forecasting a price range of $16.40-18.25 in February.
Reports last month that the Chinese government is considering reducing its export quotas for metals could see some outflows of silver and silver products if price difference between China and foreign market become attractive.
INTL pegged palladium at $1,180-1,270 in February on an improving gold complex and more constructive fundamentals.
The auto market in Europe seemed to have bottomed out in 2014 and is making a modest recovery into this year, with new car registrations rising 5.7 percent,
In terms of supply, the majors continue to trim operations and spending so output may struggle to recover in 2015 as well.
“Lonmin was the latest to say that it would cut capital expenditure this year due to low metal prices and although it pledged to maintain its annual production target for in-concentrate platinum metal at 750,000 ounces in 2015, it is difficult to see how it will be able to do so if it is cutting back spending,” it said.
INTL sees palladium at $755-820 this month, with positive fundamentals likely to provide some support.
While Norilsk remains interested in buying palladium from Russia’s central bank, it has yet to receive a reply from the authorities.
“It is not certain what will happen if the Norilsk purchase goes through; the thinking is that the metal would be in strong hands and not readily sold off, but for now that is more speculation than anything else,” Meir said.
