The sharp decline in gold prices during February and Early March has forced JP Morgan to lower its gold price forecast for the entire year 2015. According to them, prices of the yellow metal are likely to drop further during the second and third quarters of the year. However, strong physical buying may offer some support during Q4 2015. JP Morgan has also lowered the average silver price forecast for the year.
The gold price forecast for the full year has been lowered by 3.6% to $1,188 per ounce. The U.S. interest rate hikes may drag gold prices, despite temporary boosts from geopolitical events. The escalating tensions in Yemen and deadlock over Iran nuclear deal may provide temporary support to gold prices.
The Q2 average gold prices may witness a drop of 2.4% over the previous quarter at $1,190 per ounce. The prices will drop further by 3.4% to average around $1,150 per Oz by third quarter. Q4 will provide some upward momentum to gold prices. Physical demand in China and India are likely to pick up, taking the average gold prices to $1,190 per Oz during the last quarter of the year. JP Morgan forecasts 2% decline in 2016 average gold prices to $1,168 per ounce.
Larger macro themes such as U.S. Fed interest rate hike, dollar strength and geopolitical risks are likely to influence silver prices through 2015 and 2016. The growth in global economy is expected to boost the industrial applications for silver. However, availability of cheaper alternatives may stem this growth. JP Morgan projects 2.5% annual growth in industrial demand over the next two years.
The bearish price sentiment is likely to overweigh uptick in industrial demand. The average silver price for 2015 has been lowered by 5% to $16.39 per ounce. Also, JP Morgan forecasts silver prices to average at $16.44 per ounce in 2016.