The Federal Reserve's rate increase to 3.75%-4% in September, coupled with elevated energy costs, has triggered reduced appetite from major buyers and sparked outflows from gold-backed exchange-traded products. Central banks have also turned into net sellers, with Turkey shedding 82 tonnes and Russia offloading 56 tonnes through August. Standard Chartered cautions that the asset must defend critical technical support at $3,886 an ounce to avoid deeper losses. However, analysts maintain that long-term reserve diversification away from the US dollar will eventually spur a multi-year rally.
Key points
Rising crude oil prices and aggressive US monetary tightening continue to limit the safe-…: Rising crude oil prices and aggressive US monetary tightening continue to limit the safe-haven asset's immediate upside potential.
Standard Chartered warns that failing to maintain technical support at $3,886 an ounce co…: Standard Chartered warns that failing to maintain technical support at $3,886 an ounce could expose the commodity to steeper price drops.
Major investment banks project substantial long-term gains by 2027, with Goldman Sachs ta…: Major investment banks project substantial long-term gains by 2027, with Goldman Sachs targeting a price of $5,400 an ounce.
Sources checked by our analysis pipeline: 1
The pressure on gold has intensified as renewed tensions over the Iran war drive crude oil prices higher, stoking inflation concerns and fuelling expectations of further US Federal Reserve rate hikes later this year. At its latest meeting, the Fed raised interest rates for the first time in three years, and investors expect the tightening trend to continue in upcoming meetings.
Here’s why analysts are nervous
Bank of America (BofA) expects gold to remain below $4,000 over the next three months, while forecasting an average price of $4,000 an ounce in the fourth quarter. Its demand tracker points to a 16.6% year-on-year decline in purchases by key buyers. Indian imports fell 77.8%, while Chinese imports increased 39.3%.Jewellery demand has also weakened. Data from the World Gold Council shows that jewellery demand declined 25% in the US, 15% in India and 28% in China during the second quarter.
Central bank activity presents another potential headwind following a period of strong buying earlier this year. In its October 12 note, BofA flagged the possibility that central banks could turn sellers amid escalating…
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