Growing optimism that the U.S. economy can avoid a severe recession even as the Federal Reserve maintains its hawkish bias continues to weigh on the gold market as prices trade near a six-month low.
However, analysts at the Australian-based bank ANZ said that despite short-term selling pressure, they are maintaining their bullish medium to long-term outlook on the precious metal. Daniel Hynes, senior commodity strategist and the lead author of their latest report, said that while he can’t rule out a drop below $1,900, he does see signs of solid support in the marketplace.
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“We believe the Fed is near the end of its hiking cycle, the USD remains in a structural downtrend and tightening credit conditions could be an economic risk,” Hynes said in the report. “These present a supportive backdrop for gold.”
Although ANZ remains bullish on gold, the current lackluster environment has caused the bank to push back its predictions for new record highs. The Australian bank now sees prices averaging around $2,050 an ounce by the fourth quarter of 2023. Prices are expected to reach new highs by the end of the first quarter of 2024, with an average price of around $2,100 an ounce.
The medium-term bullish outlook comes with December gold futures last trading at $1,933.60 an ounce, unchanged on the day.
In the near term, Hynes said that the biggest risk for gold is the growing ‘Goldilocks’ economic conditions that are developing.
“The US economy remains resilient, as evident in strong economic data. Moderating inflation and strong labor data present an ideal macroeconomic balance. As a result, the market has pushed out the possibility of a hard landing. This diminishes safe-haven flows for gold,” Hynes said.
However, with inflation continuing to ease from last year’s 40-year highs, ANZ expects that the Federal Reserve has reached peak interest rates. Haynes added that gold shouldn’t be spooked by the potential for one last rate hike.
“Real rates are likely to lift amid easing inflation. As a non-yielding asset, gold inversely tracks US real interest rates,” he said.
Although the U.S. economy has remained fairly resilient, ANZ doesn’t rule out the potential for a recession by the first quarter of the new year.
“While the probability of recession has decreased, the risk of an economic downturn is not completely off the table. Tighter credit conditions and softer demand for credit are normally associated with a risk of recession. Should this materialize in 2024, we expect investors to start hedging this economic risk by increasing their gold holdings,” the analysts wrote.
The analysts also said that despite ongoing liquidations in gold-backed exchange-traded products, the precious metal is in an excellent position to benefit when market sentiment starts to shift.
“We believe investment demand could quickly pick up once the market either gets confirmation on the pause of interest rate hike cycle or economic growth disappoints,” Hynes said.
Written for and published by KITCO ~ August 16, 2023
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About admin
Please allow me to introduce myself; I am Jeffrey Bennett, President of Kettle Moraine, Ltd., the parent of Sierra Madre Precious Metals.
I have been married for 53 years with two children and four grand-children, a veteran of Viet Nam, student of history (both American and film), and was host for fifteen years of Perspectives on America on the alternative airwaves, covering such subjects as, health and wellness, news, political satire, education and editorial commentary on current events through the teaching of history, and Protecting Your Wealth. In early 2018, I took a several month hiatus to complete some family business but returned to airwaves April 17, 2018).
At the age of ten, I sat in a bank-vault in the Citizens Bank of Mukwanago, Wisconsin with my grandfather going through bags of old American Peace dollars, hand-selecting each coin as dated rolls of 20 coins were carefully put together and rolled. Learning of the history of these beautiful pieces of Americana, I asked my grand-father, "Why are we doing this?" to which he replied, "Because someday they are going to do the same thing with the silver in our money that, that (S.O.B.) Roosevelt did with gold in 1933." It took only six-years for his prediction to come to pass at the hands of a disciple of Roosevelt's... and what will a Federal Reserve 'dollar' purchase today - and what will that old 90% Silver Peace Dollar purchase?
Although at the age of ten, there was little understanding of the meaning of it all, over the next half-century I became well-versed on the subject matter. During this summer of my education, I began to purchase silver coins as a collector and some small, international gold coins two years later - not an easy feat in the shadow of the Roosevelt confiscatory policies of 1933. Although those policies remained in effect until the mid-1970's, it was not until 1991 that I found that one could make a living providing precious metals and collectible, historic numismatic coins to a willing and concerned clientele.
It was also during that year, that I began a relationship with one of the first Trust companies to give the public access to gold and silver as part of an Individual Retirement Account (IRA) - and Kettle Moraine, Ltd., founded in 1995, but have ceased providing service due the the intense change-over of the provider.
In November 2011, after a 15 month broadcast on another network, I returned to the airwaves with my then revamped program, Life, Liberty & All That Jazz, and for over 28 years, I have been proud to serve the family of listeners of my numerous broadcast programs for physically-held precious metals for investors and collectors alike. On March 23, 2020 I launched my brand new - appropriately named program, The Edge of Darkness on the Republic Broadcasting Network, and thus continue to remain available to our long time clients and their families. Ah yes - find out what "inter-generational" wealth provision has done for our clients over the past three decades.
Don't buy the sizzle of that steak until you understand the cost! In other words, don't buy the bull being dispensed by the 'rare coin' pitchmen until you understand the full story. We, at Sierra Madre Precious Metals, will be proud to serve your needs.
