The World Bank Made History: Gold Will Drop To These Levels!

The World Bank expects the Federal Reserve to continue raising interest rates through 2023. That’s why he says the price environment for gold will be strong next year in the latest commodity price cut.

World Bank cuts gold forecasts

The international financial institution released its updated claims on Thursday. In this context, the World Bank expects gold prices to fall another 4% next year. This assumption came after gold reported that it fell 8% in the third quarter. Analysts make the following assessment in the report:

The rise in interest rates and the appreciation of the US dollar outweighed concerns about rising inflation and geopolitical risks. The Fed has increased its policy rates by three points in total this year, five times. This caused the US dollar index (DXY) to rise 16% to its highest level in 20 years. In this midst, the yield on 10-year Treasury Inflation-Hedged Securities (TIPS) reached its highest level since February 2011. Thus, it raised the opportunity cost of investing in zero-yield assets.

“Current claim: Gold prices will fall by 4% in 2023”

The latest price estimate is mixed compared to the World Bank’s April claims. The bank had expected gold prices to rise modestly in 2022 and then fall 10% next year. The updated outlook comes as gold prices continue to hold the long-term foothold at around $1,650. Another 4% drop in price means gold drops to $1,600.

The report states that investment demand for gold will continue to have the largest impact on market prices. For five months in a row, investors have liquidated their positions in global gold-backed exchange-traded funds. At the same time, the report notes that low precious metal prices are helping to support physical demand. However, this will not have much effect on prices. Analysts highlight the following issues in the report:

Physical purchases are unlikely to be enough to offset the cash headwinds facing investment demand. It is possible that interest rate increases will continue in the next year. Therefore, we assume that the price of the premium metal will decrease by 4% in 2023.

World Bank predicts further decline for silver

Looking at silver, the report says prices fell 15% in the third quarter. He notes that the metal underperformed as calmer concerns put pressure on industrial demand expectations. The report includes the following assessments:

Photovoltaic demand continues to increase. However, global electronics production fell for the fifth consecutive month in September. As a result, consumer electronics demand has weakened considerably. We expect sluggish physical and investment demand to keep silver prices under downward pressure. We expect silver prices to be 16% lower in 2022 and to remain soft in 2023.

However, in the long run, the bank remains optimistic that silver prices will recover. “Silver continues to take advantage of power transition, particularly for its use in solar photovoltaic cells,” the analysts say.

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