(June 23): Deutsche Bank AG reduced gold price forecasts by as much as 22%, as investors become more wary about the outlook for US monetary policy and investment demand for the precious metal dries up.
Bullion is now seen at US$4,300 ($5,569) an ounce in the third quarter, down by more than a fifth from the prior outlook, and US$4,800 in the final three months, lower by 17%, Michael Hsueh, a research analyst, wrote in a note. Both revised targets still imply prices are expected to gain from current levels below US$4,100, although they are markedly less bullish than before.
Deutsche Bank’s more cautious outlook follows a move last week by Goldman Sachs Group Inc, which axed US$500 off its year-end forecast to US$4,900 an ounce as it now sees no rate cuts by the US central bank this year.
Gold has slumped by almost 12% so far this quarter, as the Middle East war initially lifted energy prices, boosting expectations for tighter monetary policy. At its most recent rate-setting meeting, US Federal Reserve (Fed) officials opted to keep policy unchanged but signalled growing support for hikes. At the same time, new chairman Kevin Warsh vowed to restore price stability.
“Fed repricing, together with resilient US macro data, has played the primary role in pushing gold lower,” Hsueh said. The bank’s fourth-quarter target is based on the view that the Fed will go on holding rates steady, but should there be three to four hikes, gold may fall to about US$3,800, he added.
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Continued sales from gold-backed exchange-traded funds showed that the usual support for the metal is “notably absent”, he wrote. Meanwhile in China, the metal’s onshore discount to Comex prices suggests imports will not be a support for the market, he said.
On the positive side, “the one pillar which remains strong is central bank demand, and we expect this to be the case for some time to come”, he said.
Spot gold sank as much as 2.4% to just above US$4,090 an ounce on Tuesday, while silver — a far cheaper precious metal that tends to follow gold, with typically amplified moves — lost as much as 5%. After the hitting a record near US$5,600 an ounce in late January, gold prices have now shed more than 5% year-to-date.
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