• Gold price weighed down by strong US dollar
• Expert does not believe in recovery
• Gold jewelery demand should remain stable
advertising
Trade oil, gold, all commodities with leverage (up to 30) (starting at €100)
Take advantage of price fluctuations in oil, gold and other commodities with attractive leverage and small spreads! With only 100 euros you can start trading and use leverage e.g. B. benefit from the effect of 3,000 euros capital.
Gold prices show signs of recovery at times
In the environment of tight interest rate hikes by the US Federal Reserve, with which the currency watchdogs want to get the high inflation under control, the US dollar is becoming particularly attractive for foreign investors. As a result of a higher key interest rate, the exchange rate of the greenback increased significantly, at times in July it even reached parity with the euro – for the first time since 2002. However, a strong US dollar also has a negative impact on the commodity market. For example, gold fell to a 52-week low of $1,696.73 a troy ounce on July 20. Recently, however, the yellow precious metal was able to recover somewhat because the US dollar was trading somewhat weaker again. At times, the commodity, which is still considered a safe haven by many investors, even climbed to its highest level in four weeks. Most recently, a troy ounce of gold still cost 1,794.10 US dollars (as of August 9, 2022).
Gold price at $1,650 by the end of the year
Strategist Caroline Bain from Capital Economics does not believe that the recovery phase will continue anytime soon, as she explained to the commodity portal “KITCO”. “After the price of gold fell sharply in the second quarter, we believe that it is now close to a cyclical low,” the expert said. “A large part of this decline can be attributed to the appreciation of the US dollar. After all, gold prices have held up much better in other major currencies. Rising real US Treasury yields have also played a role.” Accordingly, the price of gold is likely to be weaker until the end of the year. “There remains a great deal of uncertainty about the outlook for the global economy and the impact of the war in Ukraine… For now, however, we expect the price of gold to decline slightly further to $1,650 an ounce by the end of 2022,” the expert said further.
Gold jewelry demand is likely to remain flat
According to data from the World Gold Council, overall demand for gold jewelery fell by two percent in the first half of 2022 compared to the same period last year. According to Bain, strict COVID lockdowns in China led to a drop in demand, but the wedding season in India meant that global demand could be largely offset and the difference to the first half of 2021 was not as great. “The price drop since April has probably also acted as a stimulus in the price-sensitive Indian market,” explained the strategist. However, demand there could weaken again in the short term because the import duties on gold were increased from 7.5 to 12.5 percent at the beginning of July and the rupee is trading weaker. However, gold jewelery should soon be in demand again on the Chinese market. However, demand from the Middle East is unlikely to change much given the high oil prices. “All in all, we expect gold jewelry demand in volume terms to remain broadly flat compared to 2021,” Bain told the portal.
Central banks buy gold – price increase expected in 2023
Furthermore, Bain expects gold ETFs to further reduce their holdings. However, the fact that some central banks are still expanding their gold reserves could have a balancing effect. Here, the expert named Turkey and Egypt in particular. “This will be enough to offset the drag on gold prices from rising US yields, dollar appreciation, ETF outflows and subdued jewelry demand,” the Capital Economics economist said.
Bain expects a sustained recovery in gold prices from 2023, when markets reflect the extent of the Fed’s tightening.
Fed tightening is expected to be less severe than feared
This is also likely to be related to the fact that the Fed’s tight interest rate policy – according to the assessment of Capital Economics – is not as strong as previously feared. For this reason, the experts recently adjusted their forecasts for the US markets. “We now expect the 10-year Treasury yield to edge up slightly to around 3 percent by the end of 2022 (previously 4 percent) and to 2.75 percent by the end of 2023, also pointing to higher real yield expectations,” Bain said further. “In the meantime, we continue to expect the US dollar to appreciate somewhat from now on as we believe the US economy will hold up better than other advanced economies in Europe and Asia and that interest rate differentials will will continue to favor the US dollar.”
Analysts at the major US bank Wells Fargo recently came to a similar assessment to Bain. Strategist John LaForge doesn’t expect the price of gold to make any sharp jumps in the coming months. He, too, is of the opinion that the yellow precious metal could rise again soon, but this could already happen towards the end of the year. Then the price of gold could climb up to 2,050 US dollars.
Editorial office finanzen.net
More news about the price of gold
Image sources: Pics-xl / Shutterstock.com, Sashkin / Shutterstock.com