Precious Metals Analysts Bernard Dahdah Sees Gold Shining in 2019

Natixis sees imminent economic growth slowdown and accompanying upturn in gold.

As gold investors try to guess what 2019 could bring, one French bank is bullish on the metal's prospects next year amid a change of economic climate in the U.S. Talking to Kitco, Natixis' precious metal analysts Bernard Dahdah said his bank sees an imminent economic growth slowdown and an accompanying upturn in gold prices.

The average domestic investor has had little difficulty maintaining optimism this year. The Federal Reserve proceeded with its hawkish agenda, backed by positive economic data reports and a high-riding dollar. President Trump's historic tax cuts also extended his campaign promise of a reinvigorated U.S. economy. But according to the Kitco article, several flash crashes in the U.S. stock market, most recently in October, affirmed to investors that trouble might be brewing.

Dahdah points out that market participants were quick to rejoice over tax cuts while ignoring the more significant issue of budget deficit. Whereas the cuts were only intended to serve as a short-term stimulant, the article writes that the $985 trillion of projected deficit for 2019 is a long-lasting issue without an easy solution.

Dahdah expects the U.S. deficit to become more prominent next year and force government officials to take a step back. The fading of the stimulus effect will place further pressure on stocks, likely leading to more corrections. Meanwhile, the Fed will wrap up its tightening cycle after years of successive hikes.

According to the article, this environment of stagnant growth and tumbling stock valuations will play directly into gold's hand as investors rush to move away from riskier assets. The weakening of the dollar, expedited by the change in Fed's policy, will remove additional pressure from the yellow metal. Dahdah said that the dollar index will face more hurdles as central banks around the world commence their own tightening.

The return of uncertainty will quickly bolster gold prices, and Dahdah sees the metal averaging $1,275 an ounce in 2019. However, the analyst noted that gold has plenty of catalysts waiting in the wings, and that the metal could shoot up to $1,350 an ounce next year.

Natixis also sees great things in store for silver after a middling year. According to the article, the bank predicts silver will catch up to gold due to renewed interest in commodities, thereby closing the gap in the highest gold-silver ratio since 1993. Dahdah said that investor demand will push silver to an average of $16 an ounce in 2019 with the possibility of a climb to $18 an ounce.