The gold market is holding a critical support around $1,675 an ounce. Meanwhile, consumer sentiment continues to improve and inflation expectations remain stable. So what’s next? In this article, we share with you four big prospects for gold. Here are the details…
UofM survey shows positive signs for gold market
On Friday, the University of Michigan (UofM) said its consumer sentiment survey’s preliminary estimate rose to 59.5 from August’s 58.2 data. The data were relatively in line with expectations. The gold market sees modest relief in the initial reaction to the latest sentiment data. December gold futures are moving into neutral territory, trading near session highs and trading at $1,678.10 an ounce. “After the marked improvement in sentiment in August, consumers showed signs of uncertainty about the direction of the economy,” said Joanne Hsu, director of consumer surveys at UofM.
Positive for the gold market, the survey highlighted falling inflation expectations. The report said consumers are seeing inflation rise 4.6 percent from the previous forecast of 4.8 percent for next year. The report stated that this was the lowest inflation forecast in a year. Five-year inflation expectations fell to 2.9 percent from 3.1 percent in August. “However, it is unclear whether these developments will continue as consumers continue to exhibit significant uncertainty about the future course of prices,” said Hsu.
Economists noted that if inflation expectations remain stable, the Fed’s aggressive monetary policy stance may slow its pace. However, many economists noted that it would take more than just one or two sentiment surveys to slow the current trend. Adam Button, chief currency strategist at Forexlive, said: “The downside there seems to be struggling with rising prices. It will give the Fed some comfort for that. This highlights the Fed’s credibility,” he says.
ANZ Bank: Gold eyed $1,600
Meanwhile, ANZ Bank economists lowered their XAU/USD short-term forecast to $1,600. Analysts believe the US dollar will sustain its strength for longer than they think. Also, worsening liquidity conditions and higher US yields will fuel “safe haven” flows, analysts say. It will increase the risk premium. ANZ Bank’s report also includes the following statements:
Europe is facing a serious energy crisis. This provides support for the USD and upside for the EUR. This makes us think that the USD will peak in the first quarter of 2023. We see that gold continues to underperform in the face of the continued strengthening of the dollar. USD is still the preferred asset as a result of rising geopolitical and economic risks. However, the risk of either stagflation or a direct recession could reverse this situation. Gold has traditionally performed better in such environments. We see more negativity in the short term. We lowered our short-term (0-3 months) target to $1,600.
TD Securities: Gold will drop further
cryptocoin.com As we reported, the strong dollar and rates continue to put pressure on precious metals. Strategists at TD Securities believe there is more room to the downside. According to analysts, the continuation of inflation supports the aggressive efforts of the FED. Analysts are expecting another 75 basis points increase in November. TDS analysts also use the following statements:
In this regard, while prices are certainly weak, the price action of precious metals may decrease further due to the longer duration of the restrictive rates regime. As predicted by Laubach-Williams, gold and silver prices tended to systematically underperform when markets expected the real level of the Fed funds rate to rise above the neutral rate.”
Commerzbank: Recovery possible in the medium term
A 75 basis point increase for the Fed’s meeting next week has already affected prices. Strategists at Commerzbank analyzed how the yellow metal might react to such a move. According to analysts, if the Fed raises interest rates by more than 75, gold prices could fall even more. But it depends not only on the Fed rates, but also on the possibility of sticking to higher interest rates. Comments from Commerzbank analysts are as follows:
The gold price is likely to suffer less if the market faces higher rates in the short term but anticipates stronger rate cuts next year due to recession fears.” We still foresee the potential for a recovery in the medium term because we expect the Fed to lower interest rates a bit more next year in response to a shrinking economy.
