Comments from World Famous Analysts: Where Is The Gold Price Heading?

Gold was one of the star players for most of 2020. But with the impact of the coronavirus waning for much of 2021, the bullish sentiment for the yellow metal has definitively cooled in the third quarter. But today, another variant of Covid has emerged, which has prompted most of the world to take restrictive measures once again. Will the safe haven feature that it has historically offered in times of crisis like this be decisive for the gold price again and help it eclipse last year’s record levels?

Developments that determine the price of gold

Gold is among the world’s best-known safe-haven assets during turbulent times. Investor interest in the precious metal tends to rise when there is more uncertainty and more volatility than usual surrounding traditional financial markets such as stocks and bonds.

This was certainly evident in 2020, especially in the first quarter, as the coronavirus pandemic plunged global markets into panic. Earlier in August, the gold price hit an all-time high of $2,067 and had risen markedly above $1,850 for the rest of the year.

But as the world steadily recovered from Covid-19 for most of 2021, gold pulled from these highs. For example, US President Joe Biden’s administration’s massive $1.9 trillion pandemic relief package at the start of the year was a major factor in the fall in gold prices, with the yellow metal plummeting from around $1,950 in early January to below $1,700 by the first week of March.

TD Securities: Demand for gold may increase further

cryptocoin.com As we reported, while accelerating inflation and fears surrounding the Delta variant of the coronavirus have pushed prices above $1,900 by June, the price of gold has not been able to rise this high since then, staying below $1,800 most of the time.

This lackluster price action indicates “no sudden impulse to buy the yellow metal,” according to June analysis by Canadian bank TD Securities. Gold climbed above $1,850 an ounce in mid-November, but the rise in inflation in recent months has led gold investors to bullion to hedge against rising prices. UBS released the following statement on November 12:

Looking ahead, we see a risk of further increases in CPI in early 2022. This will further increase the demand for gold.

UBS raises gold price target from $1,700 to $1,800

With this announcement, UBS raised its price outlook for the end of the first quarter of next year from $1,700 to $1,800. Similarly, commodity strategists at ANZ (Australia and New Zealand) Banking Group note that higher inflation expectations on 16 November contributed to further gold rally.

However, the gold price has since reversed course and remained below $1,800 as of the last week of November. This can be explained, at least in part, by the reappointment of Jerome Powell as Fed Chair. Because this situation brought along new expectations for the normalization of monetary policy by raising interest rates and/or ending asset purchases earlier than initially expected.

According to Ross Norman, it’s too early to wipe gold

Carsten Menke, an analyst at Julius Baer, ​​told Reuters on Nov. 23:

The gold market has bet that Lael Brainard will be the next Fed chairman. Because Lael Brainard is considered more dovish than Jerome Powell in terms of monetary policy or stimulating the economy for a longer period of time. Therefore, a break of the $1,800 level could create more selling pressure on gold.

However, money markets ending the week of November 26 are once again pushing back the timing of the Fed’s first rate hike from June 2022 to September 2022, and forecast no further rate hikes before 2023 at the earliest. Because of this, bond yields dropped significantly in late November. Moreover, this increasingly dovish forecast shows that investors will continue to be undervalued throughout this period. Ross Norman, an independent analyst, recently told Reuters:

It’s too early to clear the bottom. Inflation still has legs to run and Europe once again has Covid-19 restrictions. However, the responsibility of proving their claims and gaining support rests with the bulls. Otherwise, the precious metal may slide down again.

Gold may find support on declines due to uncertainty, according to Amit Sajeja

Indeed, when it comes to the near side of the gold market, it’s no secret that there are case increases from the Omicron variant. Therefore, according to analysts, the Omicron variant may support gold significantly in the coming weeks. Stating that he expects the gold price to continue to be supported in this environment, Heraeus precious metal dealer Alexander Zumpfe makes the following assessment:

The uncertainty about the possible consequences of the new virus variant clearly reminds the markets that this pandemic is not over yet.

Meanwhile, Amit Sajeja, vice president of commodity research at Indian financial services company Motilal Oswal, states that he believes the gold price can find support in the declines due to this new uncertainty, and that a short-term move towards $1,830 can occur in the next three to four weeks.

UBS: US real interest rates will rise and put pressure on gold price

Indeed, few are betting that the Fed will contain inflation in 2022 by raising interest rates, further cuts in the quantitative easing program, or possibly a combination of both. This means that this support for gold prices will decrease. UBS predicts that gold prices will fall to $1,650 by the end of next year, making the following assessment:

A moderation in inflation expectations, along with higher nominal rates, will eventually push US real interest rates higher and put pressure on gold.

Jeffrey Christian, chief executive of CPM Group, also notes that while the overall health of the global economy is a much more likely determinant for the price of gold, he expects inflation to be a less worrisome factor next year:

While it’s growing in importance, it’s still far less important in the minds of me and the investors I spoke to than economic instability.

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