Strategists at Capital Economics don’t expect the price of gold to fall much further this year as the recent decline in investment demand is unlikely to continue for long. What’s more, the ongoing recovery in physical demand will prevent XAU/USD from falling too far.
See – Gold Price Analysis: Rising real yields to trigger a fall to $1670 on XAU/USD – Credit Suisse
Key quotes
“We doubt that the recent rise in US real yields will continue, and we wouldn’t be surprised if they even edged back down a little. If we are correct, then the recent slump in investment demand should subside before long, helping to remove much of the downward pressure on gold.”
“We don’t think there’s much potential for rising risk appetite to reduce investment demand further. A lot of good news already appears to be embedded into financial markets and the scope for further large increases in investor risk appetite is probably quite limited.”
“We still expect the recovery in physical demand for gold to continue. A strong economic recovery in India and a revival in demand in China should act as a floor for the gold price.”
“We don’t think that the price of gold will drop too much further from here. We forecast it will end the year close to $1600 per ounce.”
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