The striking gold forecast came from the World Gold Council today. The Federal Reserve paused its aggressive monetary policy stance. However, the hawk continues its stance. This inevitably means strong winds for the yellow metal in the near term. So what should investors do at this point?
FED approach
Joseph Cavatoni, chief market strategist for the Americas at the World Gold Council, states that it is clear that the Federal Reserve continues a solid hawkish trend. Cavatoni said this year potentially signals two more rate hikes. Federal Reserve Chairman Jerome Powell held a press conference after the central bank’s monetary policy decision. He said nearly all Committee participants considered further rate hikes appropriate.
For investors looking for a potential pivot, Powell said none of his committee members have seen a rate cut this year. “When inflation really drops significantly, it would be appropriate to cut interest rates,” Powell said. Accordingly, we are talking about a few years later,” he said. Cavatoni said this hawkish stance will continue to put pressure on gold as the opportunity costs of a non-yielding asset remain high.
The risks continue
However, the Federal Reserve is struggling to bring inflation down to its 2% target. He added that his aggressive stance will create additional uncertainty for the global economy. The FED states that the high interest rate environment creates some risks for the credit market. He also highlights that it could potentially push the economy into a recession. “As long as the Federal Reserve maintains these high interest rates, gold will continue to struggle in the near term. However, it remains a strategic asset to hold against potential financial market risks.” said.
Cavatoni’s gold outlook emerged as prices traded near three-month lows as investors digested Wednesday’s decision. Gold futures for August delivery were down 1% on the day at $1,948.70 an ounce. The US economy is relatively resilient in a high interest rate environment. But Cavatoni said investors should watch for increased risks and protect themselves. He added that the WGC maintains its view that the US economy will likely experience a mild recession this year.
Stunning gold forecast
Cavatoni said that the upside potential of gold may remain limited throughout the summer, but he does not expect a significant decline. Cavatoni also covers what strategic global investors are doing in gold-backed exchange-traded products. He states that they continue to see value in the gold price as market uncertainty remains high. On the other hand, Cavatoni stated that gold is the fourth best-performing asset this year after emerging stock markets, driven by the acceleration in the technology sector. In addition, “gold continues to perform well in this difficult environment. “Investors see the value of holding a safe-haven asset,” he said. Cavatoni added that investors should continue to pay attention to the actions of central banks, which continue to be net buyers of gold.
Cavatoni covers what will happen if the US Federal Reserve continues its hawkish stance. He also comments on how much gold prices could drop this summer. Accordingly, this situation will cause fluctuations in prices in the short term. It will also continue to see upside headwinds, which will likely make gold prices drop below $1,900. However, Cavatoni added that the market is still healthy even if prices drop by $100. cryptocoin.com When we look at it as a whole, it is obvious that Cavatoni’s comments will guide the investors.
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