Daniel Hynes, senior commodity strategist at the Australia and New Zealand Banking Group (ANZ), says the price of gold will begin to drop to $1,600 by the middle of next year as the Federal Reserve begins raising interest rates to control inflation. Daniel Hynes’ market assessments and gold forecasts cryptocoin.com We have prepared for our readers.
Strategist expects gold to drop to $1,600
“The target for the end of the year is $1,600 in gold and $22 in silver,” Daniel Hynes says in an interview for the year ahead. The strategist explains that most of the gold’s sales will take place in the second half of the year:
We do not expect much increase from current levels. The $1,800 level is essentially our Q1 target, which is slightly above current levels. And then, in the second half of the year, gold is likely to loosen and drop to $1,600 by the end of the year.
According to Daniel Hynes, additional volatility is expected, but nothing too drastic. “The volatility in the gold market is relatively low,” the strategist says, noting that this is partly due to the Fed’s transparency about its policy, and that this situation will continue.
According to the strategist, gold is unlikely to see wild swings, at least in the first half of the year, other than a black swan event or a major change in policy. But Daniel Hynes stresses that once the rate hike cycle begins, more volatility will weigh on the bottom:
For the coming year, we have two increases in our forecasts, both in the second half of the year.
An important factor for gold will be currency increases, according to Daniel Hynes
ANZ’s outlook for inflation is that it will remain relatively high in the first half of the year. Daniel Hynes says that as supply bottlenecks ease, some of them will shrink slightly. However, he also reminds us that they are starting to see signs that the expected decline in inflation will be much lower than many people expect, including the Fed. The Fed’s ability to contain inflation and bring it back to 2%-3% will take time, according to the strategist:
If inflation is still high by the end of next year, then you may start to see the Fed move to tighten it. For now, they’re happy to let it stay on trend.
Saying that the US stock market will likely sell out when the Fed starts tightening next year, Daniel Hynes states that they have been in an extraordinary run for a long time and this will be a kind of spark to create another sell. But, according to the strategist, reaction to rate hikes will be limited as markets already see this coming:
Actually, we don’t expect to see a big reaction without shrinking in this way. For now, rate hikes are still a late 2022 story for the market. This will be the gap between expectations for a reduction in asset purchases and rising interest rates. These are separate issues. While watching the gold price, the more important factor to be aware of will be exchange rate increases.
“Potential black swan events: Exacerbation in the geopolitical and energy crisis”
Daniel Hynes also points out that the perfect conditions for a gold rally are largely behind the market, including loose monetary policy, low interest rates, high inflation and massive fiscal support:
It’s hard to see what could trigger another rally, at least in the short term. The Fed will loosen buying. Markets are pricing in a rate hike in the not too distant future. The outlook for the US dollar remains flat. These conditions do not encourage the rally. Apart from this story of inflation, which continues to accelerate, there will likely be another period of relatively stable prices.
Daniel Hynes notes that potential black swan events to watch out for next year are an exacerbation of the geopolitical and energy crisis:
The energy transition, and everything that comes with it, will be an important transition next year. If this leads to significantly higher inflation, it could still affect the precious metals sector itself. Also geopolitics. With the Ukraine situation, there is a standoff between Russia and the West. And creating tensions in the South China Sea. These will be a greater risk for 2022.
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