From late February to mid-March 2022, gold prices rose mostly due to ‘safe haven flows’ triggered by the war in Ukraine. From the next six weeks to mid-April, gold remained high, while US real interest rates rose and put pressure on the yellow metal. We have compiled the forecasts of analysts who interpret the market for our readers.
Commerzbank: Gold prices face headwinds
High inflation could lead to sharper hike calls from the European Central Bank (ECB) and the yellow metal, according to Commerzbank economists’ report can apply pressure. Economists make the following assessment:
Gold is facing headwinds due to a stronger US dollar and significantly higher bond yields.
“In this case, gold prices may come under pressure”
Economists, inflation in Germany unexpectedly 7% in May After rising to .9, the EU-wide inflation rate is likely to rise further, he says. In this environment, according to economists, gold should really be in demand as a store of value. Economists predict:
However, such a high rate of inflation could reignite the debate over whether the ECB should raise interest rates more quickly or sharply. At the meeting to be held in July, calls for a 50 basis point increase may sound louder, in which case gold prices may come under pressure. Consensus positions below
TDS: CTA flows are massive
consensus positions remain on the long side and keep precious metal prices flexible. What prevents the golden beetles from surrendering? The strategists at TD Securities have the answer:
CTA trend follower streams help explain stubbornly rising position levels. But gold prices are now pushing the threshold that will mean a sustained downtrend in the coming months, showing that the bar is low for additional liquidations from this cohort.
While CTA flows have been enormous, the pandemic has revived on-demand gold trading, leaving ‘Other Reportables’ to play a larger role in speculative markets, according to strategists. Strategists point out that this group has not yet surrendered and represents the greatest risk for a liquidation vacuum as it exits the pandemic regime, without the Fed’s belief that it can blink.
Société Générale’: Other gold drivers are currently on the rise
As a result, gold prices have declined recently and reconnected to their main driver, real interest rates. Strategists at Société Générale point out that real interest rates are the main driver of gold. Stating that the real interest rates/gold relationship may deteriorate when exceptional events occur, strategists make the following statement:
The relationship between gold and market-based real interest rates has been very strong over time, but there were two short-term deteriorations earlier this year and after the start of the Ukraine war. lived. But while both disruptions are temporary, other gold price drivers are currently bullish.
“The relationship between gold and real interest rates has strengthened”
Strategists, as examples of these drivers, “Ukraine war and other geopolitical risks , fears of inflation-induced recession, global supply chain weakness and flows to gold ETFs, and moves by central banks that are not aligned with the US to dollarize their reserves. Strategists make the following assessment of the gold-real rates relationship:
We prefer to argue that the gold/real rates relationship is strengthened as it can protect against multiple bullish factors and still drive prices down significantly. Real interest rates, as measured by the nominal US Treasury rate minus the US CPI, have less, if not irrelevant, impact.
“A drop to $1,800 should not be overlooked for gold prices”
CME Group’s latest data for gold futures markets shows the short position’s downtrend on Tuesday, this time around He noted that he had increased 5.7 thousand contracts. Instead, volume reversed two consecutive daily pullbacks, raising nearly 56.7k contracts.
According to market analyst Pablo Piovano, gold prices continued their corrective downtrend and fell below the 200-day key SMA on Tuesday, opening the door for more declines in the very near term. . However, the analyst notes that this move is behind the waning open interest and draws some strength from the potential extra weakness. Against this, the analyst expects the $1,800 mark to offer reasonable traction.
