Gold prices are stuck in a narrow area due to the impact of headwinds. However, as the U.S. economy continues to grow and inflation pressures ease, the gold price will likely fall to $1,800 by the end of the year, according to Capital Economics analysts.
While global gold demand decreased, gold supply increased
The gold price is trading near a two-week high as the US dollar retreats from a six-month high. With this, cryptokoin.comAs you follow from , yellow metal investors have a cautious attitude. Investors are taking positions ahead of important central bank meetings that begin today with the US Federal Reserve. The focus of the market is on future interest rate increases and inflation outlooks. These are elements that are vital to the performance of the precious metal. In a recent report, Capital Economics analysts make the following assessment:
The price of gold has fallen since rising to around $2,000 in March-May this year on safe-haven demand (due to concerns about the stability of banks in the US and Europe). According to the World Gold Council, global gold demand in the first half of this year decreased by about 5% year-on-year, mostly due to reduced investor demand through exchange-traded funds, while gold supply increased slightly.
Analysts predict further declines for the gold price
Capital Economics predicts further demand declines for the gold price “due to easing investor demand for gold as a hedge against a severe economic downturn and high inflation.” This is because, according to analysts, the US economy experienced only a marginal contraction in the fourth quarter. Also, the fact that the economy will recover next year is also effective. Additionally, analysts predict that US inflation will approach the Fed’s 2% target by mid-2024. In this context, analysts make the following statement:
To be sure, our U.S. economic outlook is consistent with investors’ declining interest rate expectations. However, we think the downward pressure on investment demand from the US ‘soft landing’ will more than offset the upward pressure from lower interest rate expectations.
Capital Economics’ gold price expectation for the end of the year: $1,800
Long-term real interest rates have risen sharply since the beginning of 2022. Despite this, the gold price remained “remarkably resilient” during this period, according to analysts. “One reason, they note, is that investors, after driving ETF gold holdings to record levels during the pandemic, are reluctant to reduce them when interest rates rise. Analysts said, “There is a lot of uncertainty about the economic outlook. “Considering this situation, this makes sense,” they say.
They also expect the combination of the high gold price and the weakness of Chinese and Indian currencies in terms of the US dollar to continue to impact gold demand for jewelery in the second half of this year, which fell 1% year-on-year in the first half. Based on this, analysts point to the following levels:
Finally, the historically high gold price will also continue to stimulate supply. So, overall, we predict the gold price will drop from around $1,918 today to $1,800 by the end of the year.
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