A weaker US dollar and escalating geopolitical tensions will continue to support gold this year, with the precious metal rising to $1,900 in the fourth quarter, according to StoneX. However, a year’s ‘boring prices’ does not mean a ‘boring market’. Market comments and gold price predictions from Rhona O’Connell, StoneX’s head of market analysis for the EMEA and Asia regions. cryptocoin.com compiled for our readers.
According to Rhona O’Connell, gold price will take its cues from these
“This year, the gold price will take its cues from Federal Reserve policies, the direction of the US dollar, and geopolitical tensions,” said Rhona O’Connell, noting that the Fed’s new monetary cycle is now well discounted and the lack of an immediate reaction to December’s dot charts is an example of this. is showing. The famous manager makes the following assessment:
Headwinds, including geopolitical risk and persistently negative real interest rates, are supporting the situation, and there is reason to believe that the dollar will weaken somewhat as the ECB shifts its position and emerging markets show signs of recovery.
Inflation and the Fed’s fight against rising prices will continue to be at the forefront. But markets may be exaggerating how aggressive the US central bank should be in its fight to control inflation. Market participants are currently expecting four or five rate hikes this year. The Fed’s dot chart tells investors there could be three rate hikes. But it is balance sheet shrinkage that can make a big difference, giving policymakers more flexibility. Rhona O’Connell has this to say about her 2022 look:
We have two extreme possibilities. One extreme is that rate hikes and balance sheet shrinkage will be aggressive, which will keep rates much higher. The idea would be to push inflation out of the system as much as possible. But that risks derailing the economic recovery. On the other hand, balance sheet shrinkage on its own may be good enough to give the Fed more flexibility in rate hikes. And we can only raise two rates this year.
“DXY will be another driver for gold to watch closely”
“The reality of 2022 will probably be somewhere in the middle,” says Rhona O’Connell, even with the Fed’s tightening program, negative real interest rates that are positive for the gold price will remain. Nominal interest rates in Europe and parts of Eastern Europe are in negative territory. As for the US, real rates are negative for up to 20 years. According to the famous executive, despite the balance sheet shrinkage, contraction and interest rate hikes, there does not seem to be a predictable way for the two to ten-year real bond yields to move into the positive territory in the near future.
StoneX forecasts a weaker dollar towards the end of the year, emphasizing that DXY’s gold is another driver to watch closely. “Outside we have a slight bearish trend in the dollar,” explains Rhona O’Connell, referring to domestic issues and competition from the Euro. The famous manager expresses the basis of his predictions as follows:
There is uncertainty over economic legislation as the Build Back Better (BBB) plan is currently under significant threat. Also, we are in the midterm election year and the debt ceiling is rising again. Add in the further possibility of a much more hawkish European Central Bank, and an argument emerges for emerging markets to start attracting international investment.
StoneX’s gold price forecast for the end of the year is $ 1,900
On top of that, Rhona O’Connell, who mentioned that there are geopolitical risks along with the increasing tensions between Russia and Ukraine, and China and Taiwan, states that all these factors work in favor of gold. However, one headwind to watch out for, according to the famous executive, is economic stability, which is great for markets but a drag on gold:
Economic stability may slightly dampen the wind in gold’s sails. We are looking for relatively narrow ranges for gold this year. It’s going to be a potentially boring price year. But a boring price does not mean a boring market. We estimate the annual average of gold at $1,871 and expect it to trade at $1,900 in the fourth quarter.
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