Gold Lowest Since April 2020, A Rebound Is Expected In Coming Months

Gold is now near $1,650 an ounce.

Rising interest rates have dragged gold prices down from record highs six months ago to their lowest levels since April 2020, but analysts expect interest rates to slow in the coming months. will increase from

Traditionally seen as a ‘safe haven’ asset, gold prices soared above $2,060 an ounce in March after Russia sent troops into Ukraine, triggering a standoff with the West.

But rapid US fiscal tightening has pushed the dollar to a 20-year high, making dollar-denominated gold too expensive for many buyers. It also raised yields on government debt, making non-yielding gold less attractive.

Investors responded by selling. Gold is now around $1,650 an ounce, down 20 percent from its March high, and U.S. gold futures are betting on further declines to come.

“US fiscal policy is firmly in the driving seat,” said Carsten Menke, an analyst at Julius Baer.

Gold could fall to around $1,580 if U.S. interest rates rise to 3.75 percent, which markets expect in November, Menke said, and $1,285 if rates hit 5.5 percent. can slide to

The technical picture is also grim. Gold is “locked in a descending channel” with support at $1,645 and $1,606 beyond, said Tom Pelek, technical analyst and chief investment officer at FortoWealth.

But analysts are waiting to see when interest rates stop rising and start falling — something they say should weaken the U.S. dollar, lower bond yields and help gold. .

Financial markets are bullish on the benchmark Fed funds rate next year, and a possible cut toward the second half of 2023.

“If gold prices go down, that’s a buying opportunity,” Menke said, predicting that gold could move toward $1,900 next year.

Citi analysts said gold prices are likely to fall in September or October and prices should average $1,775 an ounce in the final quarter of this year and $1,870 in 2023.

Bank of America predicts that gold will average $2,100 in 2023.

Geopolitical instability following Russia’s invasion of Ukraine is also supporting bullion and fears that higher interest rates will destroy economic growth without curbing inflation – a condition known as stagflation. known as.

Both of these situations encourage investors to buy gold as a safe store of value.

Analysts at Australian bank ANZ said gold was currently trading above its ‘fair value’ at around $600 an ounce based on interest rates, consensus inflation expectations and a stronger dollar.

(Other than the headline, this story has not been edited by NDTV staff and is published from a syndicated feed.)

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