An extract from ABN Amro on gold, analysts looking for USD1700 by the end of this year and USD1500 at end 2022.
Citing 3 reasons.
1. Tighter global monetary policy ahead:
- Fed to start hiking early 2023
- Bank of England and Bank of Canada to probably hike before then
- ECB, Bank of Japan, Reserve Bank of Australia, Riksbank and the Swiss National Bank will likely hike later
- Only in China has the central bank been easing in piecemeal steps to support the economy.
If you are unfamiliar with the transmission of monetary policy into gold pricing ABN Amro go on:
- Tighter monetary policy is in general negative for gold prices, also because yields on government bonds have a tendency to rise
What that means is that gold does not pay ‘interest’ (it does not pay anything and indeed holders of physical gold can be charged storage fees). Hence rising rates on fiat diminish the attractiveness of gold.
2. 2-year UST real yields to rise:
- “There are two dynamics at play here. First, we expect the 2yr US treasury yields to rise a bit more than what markets are now expecting. Moreover, we think that inflationary pressures will ease. This results in higher 2y US real yields and that will weigh on gold prices going forward.”
3. ABN Amro see the USD as rising further ahead.
- “This will likely be a modest increase. Higher US dollar is generally negative for gold prices.”
Gold chart …