Gold price forecast: Gold price has given back some of its gains of the past two weeks. However, economists at Pia Chauhan consider the further correction potential to be limited, which is why they have raised their forecast for Yellow Metal.
Gold Unlikely to Fall Below $1,900 Despite Rate Hike Speculation
“Markets seem to have calmed somewhat. As a result, the Gold price has given back some of its gains. However, we do not believe that it will fall back to its starting levels of around $1,800 in the foreseeable future.”
“We estimate that the corridor for the Fed Funds rate could be raised further by a total of 50 bps to 5.25-5.50% in the next months. However, the decisive factor is that the market is likely to realize that, contrary to its current expectations, the Fed will not lower its interest rates this year. Due to the need for a correction of market expectations, we expect the Gold price to fall to around $1,900 (previously $1,800) in the coming months.”
Year-End Gold Price Prediction 2023
“However, rate cut speculations are likely to return and drive the Gold price upwards on a sustained basis as soon as US inflation has fallen more sharply and the significantly higher interest rates are felt more strongly in the real economy. This should be the case in the second half of the year, which is why we continue to expect yellow metal to rise then. We have even raised our year-end forecast from $1,950 to $2,000.”
The price of gold hit a high of $1,971/oz before retreating and finding support above $1,960. Upbeat equities and higher Treasury yields make it difficult for gold to continue its recent rally. Fears of a wider banking contagion have also abated, hurting demand for safer assets. The market cheered First Citizens Bank’s agreement to buy all deposits and loans of the failed Silicon Valley Bank. The Federal Reserve’s vice chair for supervision, Michael Barr, has suggested that SVB’s troubles were due to “terrible” risk management, and that it could be an isolated case.
Additionally, the DXY is trading at 102.60, up 0.20%, adding weight to gold, because markets still expect the Federal Reserve to raise interest rates by 25 basis points in May. The possibility of inflation being greater than the possibility of the banking crisis spreading further has led investors to price in about a 39% chance of a 25-basis-point hike in May.
Despite this, gold is still set to see monthly gains of around 8%, and a bullish engulfing pattern is apparent on the monthly chart, which suggests a bullish short-term outlook.
Investors are also looking towards the core Personal Consumption Expenditures (PCE) price index, which is expected at the end of the week, for more clues on the Fed’s monetary tightening plans. If the core PCE print comes in below 4.5%, then the Fed will have to do less to hike rates, which should weaken the USD and allow gold to gain. In this instance, a target for buyers could be $1,900.