According to TD Securities’ latest update, the gold price is looking to make a “continuous” move to $2,100 later this year, despite a “strong risk of selling” in the second quarter.
Gold price will show a continuous uptrend in the second half
Bart Melek, head of commodities strategy at TD Securities, says that while some recent gains have been undone and there is a risk of further declines in the second quarter of 2023, gold will continue to trend upwards towards the $2,100 level in the second half of the year.
There are a number of factors supporting gold at these high levels: low nominal and real interest rates, US dollar concerns, strong physical buying and continued interest from central banks. Gold is seen as a hedge against the biggest banking crisis since 2008, although the Federal Reserve is likely to raise rates by another 25 basis points in May. The latest precious metals rally, in which prices soared to $2,050 last week, was triggered in part by markets pricing in rate cuts despite Fed spokespersons promising further rate hikes. Melek makes the following assessment:
The yellow metal benefited from the disconnect between the US central bank’s hawkish policy rate guidance and the market-priced pigeon rate path. Gold’s upward price action was also the result of a weakening US dollar, very strong investor and official sector purchases seeking a safe haven from the ravages of inflation, geopolitical stresses, and concerns over the US dollar’s reserve currency status.
Risks to outlook are on the upside
Fed’s credibility is at stake here, and risks to the outlook for gold prices are on the upside. Based on this, Melek makes the following comment:
Risks are on the upside if monetary authorities are seen to dove before inflation approaches the target in a meaningful way. In fact, positioning suggests that the discretionary investor community could be a catalyst for prices to rise significantly above our year-end target as they have plenty of room to grow long exposure.
There may still be room for further corrections in the gold price
A price correction is possible in the short term due to mixed macro data releases. However, strategists add that a “sustainable” move above $2,100 is imminent. Melek makes the following statement on this subject:
Gold rallied north of $2,045 in mid-April, despite the Federal Reserve’s continued commitment to restrictive monetary policy that raised interest rates at a record rate this tightening cycle. However, policy uncertainty in the face of strong economic data suggests there may still be room for further corrections before the projected sustained move towards the $2,100 region occurs.
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cryptocoin.com As you follow on from , Austan Goolsbee, Chairman of the Federal Reserve Bank of Chicago, said Wednesday that he is closely watching the impact of the recent bank failures on the larger economy. Goolsbee told NPR’s Marketplace that:
I think how much tightening will be experienced on the bank side will be important in terms of whether this economy will slow down or not. Everyone predicts some growth slowdown for the second half of the year. How severe this will be will largely depend on the financial part.
The bankruptcy of Silicon Valley Bank last month increased the risk of tighter credit conditions that would work to cool the economy. This slowdown will add to the intended consequences of the Fed’s aggressive tightening cycle last year.
