Gold is currently around $1,650 an ounce.
Rising interest rates have dragged gold from a near-record high six months ago to its lowest since April 2020, but analysts expect a rebound in the coming months as interest rate hikes slow.
Traditionally considered a ‘safe haven’ asset, the price of gold spiked above $2,060 an ounce in March after Russia sent troops into Ukraine, sparking a confrontation with the West.
But the rapid U.S. currency tightening since then pushed the dollar to a 20-year high, making dollar-denominated gold more expensive for many buyers. It also increases returns on government debt, making non-yielding gold less attractive.
Investors reacted by selling. Gold prices are currently around $1,650 an ounce, down 20% from their March high, and US gold futures speculators are betting on further declines.
“US monetary policy is at the wheel,” said Carsten Menke, analyst at Julius Baer.
According to Menke, if US interest rates rise to 3.75%, which the market expects in November, gold could fall to around $1,580, and if interest rates hit 5.5%, gold could slide to $1,285. .
The technical picture is also grim. Tom Pelc, technical analyst and chief investment officer at Fortu Wealth, said gold is “locked in a bearish channel” with support at $1,645 and higher at $1,606.
But analysts are looking at when interest rates stop rising and start falling – which they say will depress the US dollar, lower bond yields and help gold.
Financial markets are pricing in a peak in the Fed’s benchmark rate next year and a cut is likely in the second half of 2023.
“If the price of gold drops, that’s a buying opportunity,” Menke said, predicting gold could move towards $1,900 next year.
Gold is likely to bottom out in September or October, and prices will average $1,775 an ounce in the final quarter of this year and $1,870 in 2023, analysts at Citi say.
Bank of America forecasts gold will average $2,100 by 2023.
Also supporting bullion are geopolitical uncertainties following Russia’s attack on Ukraine and concerns that high interest rates will destroy economic growth without stopping inflation – a condition known as inflation. development stagnation.
Both of these scenarios encourage investors to buy gold as a safe store of value.
Gold is currently trading around $600 an ounce against its ‘fair value’ based on interest rates, consensus inflation expectations and dollar strength, say analysts at Australian bank ANZ. la, said analysts at Australian bank ANZ.
(Except for the title, this story has not been edited by NDTV staff and is published from an aggregated feed.)
