The gold market continues to find its feet as prices hold new foothold above $1,700. According to Swiss Bank UBS, it is possible that this is the beginning of a larger move for the gold price. However, Credit Suisse’s fundamental outlook for gold remains bearish.
UBS gold price assumption: $1,900 by the end of 2023
UBS’s precious metals specialist, Joni Teves, has announced his 2023 gold price outlook. The expert assumes that the precious metal will rise to $1,900 by the end of next year. The bullish look comes as gold prices rise $100 from last week’s two-year low. December gold futures traded relatively unchanged at $1,717.50 for the most recent day.
The biggest factor in Teves’ double-digit increase in gold prices next year is a change in US monetary policy. UBS expects the Fed to end its aggressive tightening cycle in 2023. Moreover, he also expects the Fed to cut interest rates by 175 basis points by the end of the year. Teves notes that historically, gold prices rose 19% for every 1% cut in interest rates. The expert report highlights the following:
We think gold should benefit. Therefore, we anticipate holding a long gold status will offer an attractive risk-reward once the tightening cycle is over.
“Your precious metal is still facing some headwinds!”
UBS is bullish on gold through 2023. However, Teves notes that the Fed’s tightening cycle will continue in the first half of the year. As such, it warns investors that the precious metal is still facing some headwinds. In this context, the expert makes the following statement:
Trying to guess the bottom is always tricky. However, we think any weakness in gold in the coming months will present opportunities to position for a higher move in prices through 2023 as the Fed moderates tightening and eventually takes a more dovish stance.
Why is UBS optimistic about gold price?
Koindeks.com According to the CME FedWatch Tool, markets expect the Fed Funds rate to peak midway between 5% and 5.25% by June 2023. At the same time, the markets predict that the first rate cut will come in December of next year. But there are also growing expectations that a recession next year could force the Fed to change monetary policy sooner than expected.
The bullish outlook for UBS’ gold comes as the precious metal struggles through most of 2022, with prices falling to around $1,618, a two-year low last week. Analysts point out that the Fed’s aggressive monetary policy stance has pushed real rates to an eight-year high and the US dollar to a 20-year high, creating valuable headwinds for gold.
Credit Suisse: Gold will come under pressure again
The gold price has recovered somewhat. However, Credit Suisse’s key outlook remains bearish with a major ‘double top’ present. Accordingly, Credit Suisse makes the following assessment:
Gold rebounded last week. However, with a big ‘double top’ below $1,691/76 this is seen as a discontinuous recovery. Therefore, we expect gold to come under pressure again when the time comes.
The main purpose of the bank for the price of gold is $1,451/40
Credit Suisse draws attention to the following technical levels for the gold price:
Support holds at $1,614, a recent low. Beneath this, it is possible for bearish pressure to emerge again with reinforcement. Then $1,560 and ultimately our main goal of $1,451/40. Just a convincing weekly close above the 55-day average at $1,680 is likely to ease the pressure on the expensive metal. Also, the next resistance stands at the even more valuable 200-month average. This is currently seen at $1,805. We expect this to be the most advanced frontier.