Investing.com - ABN Amro has published a cautious outlook for the gold price until the end of 2024 and maintains its year-end forecast of $2,000 per ounce. Currently, one ounce of gold costs $2,327.28. In their latest report, Georgette Boele, Senior Economist in Sustainability at the bank, highlights several factors influencing the current state and future developments of gold prices.
"Gold prices reached a peak at the beginning of the year but have since lost momentum," said Boele. According to the report, traditional correlations that usually drive the gold price have dissolved, leading to a complex and uncertain market environment.
Central Bank Policy and US Real Interest Rates
Expected easing measures by central banks have not supported the gold price as anticipated, noted the expert. While the European Central Bank (ECB) began easing in June, the first rate cut by the US Federal Reserve (Fed) is expected only in September. "Expectations for monetary policy easing in the US have decreased this year. Therefore, the gold price should have been lower, not higher, from this perspective," explained Boele.
Moreover, the relationship between US real interest rates and the gold price has deviated from the norm. "US real interest rates have risen while the gold price has also increased," noted Boele. Normally, higher real interest rates would dampen the gold price.
US Dollar and Physical Gold Supply
The strength of the US dollar, which has appreciated by around 5% against a basket of currencies this year, typically puts pressure on the gold price. However, gold prices have risen by nearly 11% during the same period, contradicting the usual inverse relationship, according to Boele.
Concerns about a physical gold shortage, which was a factor during the COVID crisis, are unfounded in the current market, Boele noted. "There is no shortage. Premiums for gold coins are below their long-term averages, and some gold coins have negative premiums."
Investor Activity and Market Sentiment
Investor behavior shows a mixed picture. While ETF investors have reduced their positions to 2019 levels, speculative positions in the futures market have increased. "The rise in speculative positions in the futures market may have offset some of the impact of ETF position liquidations," said Boele.
The main drivers for the higher gold price this year were, according to Boele, purchases in the futures markets, purchases by central banks, particularly from China, and a positive technical picture leading to trend buying.
Gold Price Outlook
Looking ahead, ABN Amro remains cautious. The trend in the gold price is positive, but the momentum is waning. The unusually positive relationship with the US dollar and US real interest rates is seen as temporary. "If the gold price responds again to central bank expectations, it should remain stable against the US dollar and slightly higher against the euro," Boele forecasts.
Since there is currently no shortage of physical gold and central bank purchases do not justify the current price level, the bank maintains its forecast of a gold price of $2,000 per ounce for December 2024.
Technically, Boele explains the support zone between $2,220 and $2,275, where previous highs and lows overlap, as an important area. "Below that, the next support zone awaits at $2,115, where the 200-day average runs. If prices fall below the 200-day average, the long-term trend turns negative."
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