After the success of the gold price in the past year, supported by the outbreak of the coronacrisis, ABN Amro foresees that the prolongation of the precious metal will go out this year.
According to gold expert Georgette Boele, the outlook for gold deteriorated after the price rose to a record of just above $2000 per troy ounce (just over thirty grams) in August last year.
Boele adjusts the forecast for the precious metal downwards from $2000 to $1700. Remarkably enough, the ABN AMRO economist had a positive look at the gold price in December.
In the past weeks, the price of gold fell below $1900 after rising to $1950 at the beginning of the year. According to
Boele, the rise in interest rates and the upturn of the dollar played the precious metal with a fall to the level of the 200-day moving average. “The upward trend is over as soon as the price of gold falls well below this limit.”
The expected weakening of the price of gold is partly supported by the future policy of the US central bank, she states. ABN Amro takes into account that next year the Fed will temper the pace of the existing bond buy-back programme and there may be a first interest rate increase in 2023.
Another factor that has dampened Boeles vision of gold prices is an expected moderate increase in the dollar. “A stronger US currency generally has a negative impact on the prospects of the precious metal.”
The upward adjustment of estimates for US government bond rates has also contributed to the adjustment of the vision of the precious metal.
Finally, Boele sees the risk that investors still have very large positions in gold. It points out that when the previous record was set at the end of December 2012, the gold price was hit hard afterwards. Investors then massively discarded the precious metal.