As gold fell back into the $1,770s/oz level in the days following the release of the June FOMC economic estimates, the market served as a sobering reminder to investors and experts that the road to new highs is almost never easy. TD Securities economists believe that the yellow metal will recover most of its recent losses due to the Fed’s sustained emphasis on its full employment objective.
See Gold Price Forecast: Hidden Inflation Genie to Keep XAU/USD From Rising – Deutsche Bank.
“Despite the fact that the FOMC dot plot has shifted hike expectations forward to late-2023 (median showing a 50bp tightening), with many traders expecting a much earlier tightening, and that Chair Powell has begun the process of preparing markets for QE tapering, we believe the yellow metal is still in a position where a return to the $1,900/oz range is possible into 2022,” says the report.
“So far, treasury markets don’t appear to be concerned about price hikes that are out of control. Even if prices rise above expectations, we believe Mr. Powell and his colleagues would interfere in the Treasury market if rates increase to the point where they degrade financial conditions and jeopardize the Fed’s ability to meet its full employment mission. All of this suggests that real rates will likely continue low, even at the longer end of the curve, which is gold accretive.”
“For part of 2022-23, the yellow metal has a fair probability of moving back into the $1,900/oz range. In addition to all of the macro and monetary policy ducks being in a row, physical demand in China and India will need to increase for our positive outlook to materialize.”/n
