gold outlook Gold is in bear territory, but prices to rally back to $1,900 next year: ING
The gold market faces more losses as the Federal Reserve is still in the midst of its historic rate hikes. But once signs of a potential Fed easing emerge, the gold price will return to its rally mode. And that is expected as soon as next year, according to ING's latest outlook.
Yet, most of this year's losses are due to the U.S. central bank's aggressive policy tightening, which has triggered a strong rally in the U.S. dollar. The U.S. dollar index has been trading near 20-year highs throughout the summer and September. With those drivers still ongoing, more pain is in store for gold.
Real yields have also been climbing and weighing on gold since higher yields increase the opportunity cost of holding gold."10-year real U.S. yields have reached their highest levels in more than a decade and are firmly back in positive territory. Given the strong negative correlation between gold prices and real yields, it is not surprising to see that gold has struggled in this rising yield environment," Patterson pointed out.
Despite these signs being all negative for gold, ING's medium-term outlook is more constructive as the first signs of easing from the Fed are likely to lift gold prices, according to Patterson. Another potential positive driver for gold is the inverted yield curve signaling a looming recession."These concerns might see some investors seeking safe haven assets, such as gold. Although in the short term, rising rates will likely counter this to a certain degree," Patterson described.