Senior Analyst Sees Rise in Gold and Silver Prices in 2019

French bank Natixis shares what could push the metals significantly higher.

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According to the latest commodities report by French bank Natixis, the era of a strong dollar pushing down on gold prices is coming to a close. A recent article on Kitco reports that the bank’s Commodities Price Outlook for 2018-2019 has gold and silver ending the next two years on a significantly higher note.

According to Kitco, the uptrend will be driven by an erosion of the greenback, whose strong showing since the start of the year has contended with precious metals prices. One of the key factors in this shift will be a change of policy by the persistently hawkish Fed. While the central bank has thus far kept its promise of multiple rate hikes each year, Natixis doesn’t believe the hiking cycle has a lot of steam left.

The Fed will feel compelled to cease tightening due to an economic slowdown in the U.S., said the bank, which will have its own effect on the greenback. According to Kitco, the report pointed out that the U.S. economy is already operating above potential, which should combine with maxed-out employment to create an environment of stagnant growth in the coming years.

Besides an unyielding hiking cycle, Kitco writes that the dollar was also bolstered by President Trump’s recent tax cuts and the optimism surrounding them. After an initial period of excitement, Natixis predicts their stimulus will start to fade away around the second half of 2019.

Bernard Dahdah, Natixis’ senior commodities analyst, said that the greenback will be pressured further as central banks around the world unveil their own tightening schedule. He says gold will receive additional support from a dwindling global mine supply, predicted to continue dropping during the next two years.

Natixis also touched upon the trade conflict between the U.S. and China, which plays into gold’s haven allure. Although each of the two nations have already imposed billions of dollars in tariffs on the other, Dahdah believes the enmity has just begun. In this clash, the U.S. will be looking to aggravate the slowdown of China’s economy while the latter seeks to avoid an economic crisis.

Should China feel its economy come under duress as a result of U.S. trade policies, Dahdah thinks the Asian nation will be quick to escalate the conflict in order to preserve its standard of living. The unpredictability of the U.S.-China standoff and its potential ramifications should give gold investors added cause for optimism.

Natixis expects gold to average $1,275 an ounce in 2019 and $1,300 in 2020 as the dollar index plummets. The bank is similarly bullish on silver, stating that the metal’s price will average $16.50 an ounce in 2019 and $17.30 in 2020.