The Federal Reserve sought to raise interest rates further through 2023. Therefore, gold prices remained under pressure and fell to the lowest levels of the last three months. According to the latest research from ABN AMRO, this selling pressure has damaged the bullish momentum. However, he expects the precious metal to still finish the year at a higher level.
The current level may not be seen for more than 5 years!
In his latest gold price forecast, Georgette Boele, senior economist for sustainability research at ABN AMRO, predicts that gold prices will remain at $2,000 for the rest of this year and into 2024. Therefore, he said he lowered his long-term gold outlook. In his research note, Boele underlines the following:
Investors do not seem willing to buy gold at current levels. Probably because prices are relatively close to their all-time high. Also, if prices fall, the current level may not be seen for more than 5 years.
The gold market is struggling
Georgette Boele’s lowering of her gold forecast came at a time when the precious metal was struggling below $1,950. Gold futures contracts for August were last traded at $1,921.60. It also remained relatively flat during the day.
Boele states that the gold market has been strained as the market is pricing in the relaxation of the central bank in the second half of the year. The shift in market expectations came as the Federal Reserve was clear that it does not intend to cut interest rates this year, even as the most aggressive tightening cycle in 40 years has come to an end.
This is positive for the US dollar
According to the CME FedWatch Tool, markets see the possibility of a rate hike of over 80% next month. cryptocoin.comAs you follow, expectations are that this will also be the last rate hike. Georgette Boele states that her bank’s interest rate forecast is roughly in line with market expectations. It also says that this will support US nominal and real returns and the US dollar. In this context, he makes the following statement:
Previously, we did not have the view that aggressive rate cuts would come in the near term. But we expected the relaxation cycle to begin later this year. We now think that the Fed will not cut interest rates this year and will cut less interest rates in total in 2023-2024. This is a positive situation for the US dollar.
The upward movement of gold prices will be very limited!
According to Georgette Boele, the Dutch bank expects the economy to enter recession in the first quarter. That’s why he expects the Federal Reserve to cut interest rates by 175 basis points next year. Therefore, interest rate cuts will continue to support gold prices throughout the next year. Boele says this could provide the significant upward momentum needed to push prices to all-time highs. From this point of view, Boele makes the following assessment:
Since the market has already predicted this, it is also reflected in gold prices. Therefore, we think that the upward movement of gold prices against the US dollar from current levels is quite limited. Investors hold net-long gold positions. There is also the risk that some of them will be liquidated. However, investors probably bought these positions at lower levels. Therefore, investors may need to be more patient. In general, the positioning below is not excessive. However, in terms of risk reward, it may not be attractive to be long at current levels.
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