According to a market analyst, comments from Fed Chairman Jerome Powell on Friday revealed that the Fed will continue to increase interest rates aggressively until the end of the year. This means that the Fed will continue to put pressure on gold prices.
Dutch bank lowers its year-end gold forecast
Georgette Boele, senior gold strategist at ABN AMRO, says the Federal Reserve could bring the Fed Funds rate closer to 4%. Therefore, he predicts gold prices to close the year around $1,700.
The Dutch bank’s previous forecast was that the precious metal would end the year at around $2,000. The bank’s new price target marks a sharp decline. The drop in the forecast comes as gold prices hover around $1,750. Boele says gold prices have dropped 3.6% so far this year. Moving from this, he notes that prices are expected to hold solid support above last month’s lows. In this context, the expert makes the following assessment:
Below we expect only a modest decline from current levels. We did not take into account another strong rally from the highs anyway. However, this expectation is based on our expectation that the US dollar will remain relatively strong. Second, we think that US real rates are close to a peak or have already peaked. As a result, this driving force will not put significant pressure on gold prices from current levels. Third, there is a crucial support area located at the $1,680-1,700 level. We expect these levels to be retested and prices to fall below these levels, albeit temporarily.
“Gold prices are likely to recover next year”
The comments come as CME’s FedWatch Tool puts the probability of a 75 basis point increase above 70%. Last week, markets were giving a 50/50 chance for the central bank to raise the Fed Funds rate by 50 or 75 basis points.
cryptocoin.com As you follow, Jerome Powell warned in a speech in Jackson Hole on Friday that interest rates may not only rise, but may stay higher for longer than expected. After these statements, expectations in the market strengthened. Gold prices seem to remain under pressure throughout the year. However, Georgette Boele is optimistic that prices will rise in 2023. The expert predicts that gold will rise to $1,900 by the end of next year. Boele explains these views as follows:
We don’t just expect the US dollar to weaken. At the same time, we expect the Fed to begin lowering interest rates in the second half of 2023. On top of that, we anticipate lower US real interest rates. As a result, gold prices are likely to recover next year.
“Yellow metal will be subject to downward price pressures”
Powell’s hawkish speech will likely weigh on the yellow metal, according to TD Securities strategists. Strategists note that rising expectations that the Fed will continue to follow a hawkish trajectory until 2023 have prompted money managers to aggressively reduce their gold positions. In this context, strategists make the following comment:
The Fed pointed to significantly higher interest rates for a longer period of time. Therefore, the lack of upside potential in bullion also convinced investors to reduce long-term risks. Considering Powell’s hawkish style, we expect the decline in gold position and downward price pressures to continue.
