World Famous Analysts: Gold at These Levels in April-June!

A Canadian bank expects the headwinds that put pressure on the price of gold for most of 2022 to turn into afterwinds in the second quarter of 2023 as US interest rates and the US dollar peak at the start of the year. Commerzbank strategists say rising interest rates will continue to weigh on the yellow metal. TD Securities’ strategists say don’t look at gold as a safe harbor.

“We do not expect a sharp pullback in the price of gold”

In their latest gold market report, BMO Capital Markets analysts said they expect gold prices to remain relatively stable for the next few months and to bounce back above $1,700 by the second quarter of 2023. The bank predicts prices will average around $1,680 in mid-April and mid-June next year. Rory Townsend, a partner at the Canada-based bank and author of the latest gold report, said:

What’s different for us here is that gold is basically backed up enough even by 2026. Our gold price average is $1,600. We do not expect a sharp pullback in prices from where we are today. And it’s partly to do with inflation staying stickier for longer. Partly due to slowing growth during the appearance period. It is also related to the continuation of high geopolitical risk.

“There are risks that inflation will continue to rise”

Rising interest rates support the US dollar at a 20-year high. Therefore, the Federal Reserve’s aggressive monetary policy stance remains the dominant force for gold. However, Townsend expects rates to rise well above the Federal Reserve’s own estimate of 4.6%. Townsend explains:

Due to the very tight labor market in the US, there are naturally still risks that inflation will continue to rise. Potentially, we’ll see power prices pick up again during the winter months. This will likely keep inflation higher for a longer period of time. But I think it’s possible that this kind of 4.6% would be enough to curb demand and start pulling down some of the inflationary pressures we face.

“These are needed for gold to rise significantly”

However, markets are expecting a higher terminal rate of over 5%, according to CME’s FedWatch Tool. BMO Capital Markets also draws attention to the growing dichotomy in the precious metals market, as valuable outlets that contrast with the healthy physical demand, especially from China, in the works that are processed in the gold-fortified stock market. However, Townsend adds that investment demand should improve if gold prices reverse. Based on this, Townsend notes:

If we are to see gold rise significantly, or at least always hold levels above $1,700, we will need to see purchasing sentiment once again smoothen out amid macro asset allocators and more sustained net inflows.

“Interest rate hike speculations are putting pressure on gold” As you can follow, gold fell below the low level recorded on Friday. Commerzbank strategists see it as unlikely that central banks will stop the marches. Therefore, he predicts that the yellow metal will continue to be under pressure. In this context, strategists make the following statement:

Gold’s relative weakness is likely related to still high and almost unchanged rate hike expectations, fueled by persistent hawkish comments from Fed and ECB representatives.

“Don’t look at gold as a harbor of faith!”

Strategists at TD Securities say aggressive Fed rate hikes will continue to put pressure on the precious metal as inflation expectations remain high. In this bet, strategists make the following statement:

A flat and opposite yield curve has been associated with a historically slowing growth outlook and simultaneously rising gold prices. However, this cycle, the increasing persistence of inflation is a constraint for the Fed. This shows that a restrictive interest rate regime will last longer than historical precedents. In this context, gold prices are unlikely to rise with a dire prospect of growth until the Fed makes progress in the fight against inflation.

Strategists note that US price growth trends confirm short-term household inflation expectations. However, it is far from the Fed’s 2.5%, which is balanced for inflation purposes. The CPI has settled at levels that will sustain an inflation rate of 5-6% in the future. Finally, the strategists underline the following issues:

In turn, do not count on investors to whet their appetite for the yellow metal. Physical demand for bullion remained high. However, seasonal assessments suggest that this wind will likely ease soon after India’s festive season.

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