Sucden forecasts a roungebound year for gold and silver

London (Feb 4)  U.K.-based broker Sucden Financial has released its latest quarterly metals outlook for 2022. The report focuses on the divergence between Fed policy and inflationary pressures. The firm expects the choppiness to continue for a while but thinks metals are likely to hold support levels. The report also noted that the conflict between Russia and Ukraine could worsen the situation with negative impacts on metals, energy, and grains exports.

The report spoke about the yellow metal stating "we have seen gold strengthen on the back of continued inflationary pressures and the fears that central banks are not doing enough to keep the price pressures down.". Speaking on their forecast the broker said "Our overall outlook for gold is that of moderate softness. We hope to see inflation begin to soften month-on-month, given easing producing prices, and for the tightening cycle to further drive this deceleration during the year. Our range is at: $1,720-1,880/oz."

Speaking about central bank demand Sucden said "Although weakening month-on-month, we expect continued support from the central bank side as gold remains a key component of reserves. The global official gold reserves declined for the first time since January 2021, falling by 21.5t in November, as a sizeable sale from Uzbekistan tipped the scale in what could have been a flat month. Turkey and Russia were among the biggest sellers. Despite the swing into net sales in November, central banks remain on course to be healthy net purchasers for 2021."

In the near term, the report said the focus this quarter will be on inflation and subsequent government response to combat it. High nominal yields in the US and continued uptake of cryptocurrencies should further take away some of the funds that investors were putting into gold last year.

Moving on to silver the broker said "in line with gold, saw moderate softness during the quarter, further driven by industrial weakness softening the demand outlook. While the fundamentals still remain on the back foot, silver prices saw some upside in mid-January driven by a pullback in nominal yields and signs of non-abating inflation pressures. The manufacturing side remains weak and we see stronger demand for physical silver, such as jewelry and coin. Our range is at $20.6-25.3/oz."

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