(Kitco News, Fri. Oct. 6th, 2023) – The Federal Reserve’s aggressive “higher-for-longer” monetary policy stance continues to take its toll on gold as prices hold near their lowest levels since March.
While the precious metal has room to fall lower, one bank remains optimistic that despite the near-term weakness, prices can still rally above $2,000 an ounce next year and higher through 2025.
In her latest precious metals commentary, Ewa Manthey, commodities strategist at ING, said that gold prices have fallen more than 11% from their May highs above $2,000 an ounce as the Federal Reserve’s hawkish outlook has pushed long-term bond yields to their highest level in 16 years. December gold futures last traded at $1,833.60 an ounce, relatively unchanged on the day.
Gold’s latest selloff has prompted ING to revise its fourth-quarter gold price forecast to an average of $1,900 an ounce, down from the previous estimate of $1,950 an ounce. At the same time, ING now sees gold’s annual average price forecast falling to $1,924 an ounce, down sharply from an initial forecast that was looking for $2,000 an ounce at the start of the year.
“In the short term, we believe the threat of further action from the Fed will continue to keep the lid on gold prices,” said Manthey in the report.
However, while gold will continue to struggle through year-end, Manthey said that she remains optimistic that prices will start to move higher in 2024.
Despite the Fed’s aggressive posturing, ING expects that the Federal Reserve is done raising rates and is looking for a rate cut in 2024.
“Our US economist believes that the Fed is done hiking rates with cuts starting from spring 2024 as challenges continue to mount. Real household disposable income is slowing, student loan repayments are due to restart, credit availability is drying up and pandemic-era accrued savings have been exhausted by many households,” said Manthey. “We expect prices to move higher again in the first quarter of 2024 to average $1,950/oz on the assumption that the Fed will start cutting rates in the first quarter of next year, the dollar weakens, safe haven demand picks up amid global economic uncertainty and central bank buying remains at high levels.”
Posted by:
Jack Dempsey, President
401 Gold Consultants LLC
jdemp2003@gmail.com