"Presently, our RBC Economics team expects a 25bp hike in December, followed by a more aggressive rate hike cycle in 2018, and we remain cautious on the gold price going into year-end given the potential for weakness going into a possible Fed rate hike," head mining researcher Stephen Walker said in a note.
The likelihood of a December rate rise had risen from 22% in early September to nearly 80% as a stronger US economy drove market expectations for a third rate hike by year-end, he said.
However RBC continued to believe the gold price should be supported by global gold ETFs, with total holdings now sitting at 69.2 million ounces, up 6.2Moz since the start of the year.
"We believe that continued additions to the global physical gold ETFs could reflect support for the gold price and gold equities on potential weakness as institutional investors seek safe haven and hedging against geopolitical and market related risk, similar to the 2005-2007 period ahead of the sub-prime crisis," Walker said.
For investors looking for exposure to precious metals through equities, RBC highlighted more than two dozen companies with an outperform rating, including Barrick Gold (CN:ABX), Kinross Gold (US:KGC), Kirkland Lake Gold (CN:KL) and Wheaton Precious Metals (CN:WPM).
