BMI Research has revised its forecast gold price for 2017 downwards to $1 300/oz from the previously anticipated $1 400/oz, following the election of Republican candidate Donald Trump as the next President of the US, resulting in a sharp decline in gold prices.

“We see limited room for a rebound over the coming weeks,” the research firm said in its short-term view, noting that global bond yields had broken higher and looked set to continue gaining as market expectations for economic growth, inflation and interest rates were repriced for a Trump Presidency.

“Specifically, both nominal and real interest rate expectations look set to rise further as a result of expectations for a significant US fiscal stimulus package starting in 2017,” BMI stated.

Rising rate expectations are negative for precious metal prices, given that higher rates reduce the attractiveness of holding poor-performing yield investments. In the event that gold prices break below key support around $1 200/oz, BMI would not rule out a temporary overshoot to $1 050/oz.

However, while it had lowered its forecast average yearly gold price in the short term, BMI has left its long-term forecasts, for 2019 and beyond, unchanged as rising inflation pressures are expected to drive a rebound in gold prices.

Meanwhile, BMI noted that Trump's stated plans for aggressive fiscal expansion during his term meant that the expected trajectory for US rates had shifted significantly higher. “For instance, US ten-year bond yields surged to 2.19% by November 15, compared to 1.82% on November 7, breaking out of a three-year downtrend in the process.

“While we believe that the most extreme scenario of a $1-billion infrastructure stimulus package is unlikely to be realised, greater government spending, combined with lower tax rates, still look set to boost US economic growth between 2017 and 2018.”

BMI added that monetary policy in developed markets outside the US would remain accommodating particularly in Japan and the eurozone.