In summary, Base case for 2Q22 (50% probability) Gold at $1,900/oz Gold has made only limited gains in 2021 despite low ra
In summary,
Base case for 2Q22 (50% probability) Gold at $1,900/oz
- Gold has made
only limited gains in 2021 despite low rates and high inflation,
which does not bode well for the metal’s prospects. - our rates strategists do not expect Fed interest
rates hikes before 2Q22 - This, combined with our economists’
above-consensus inflation forecast, points to negative real rates; a
perfect mix for gold. - ETF holdings are
only 11.6% below their recent record, and still much higher than the
average for the past decade. This indicates that investors have
limited dry powder to allocate large amounts to gold, which we
estimate should limit the rise to $1,900/oz for 2Q22.
Upside economic scenario for 2Q22 (25% probability): Gold at $1,700/oz
- upside economic scenario would be bearish for gold as it assumes new
COVID strains are effectively combatted via high vaccination rates
and drug treatments. This would reduce risk-off sentiment, which is
detrimental for gold, but more importantly would lead to easing of
restrictions and thus higher services consumption.
Downside economic scenario 2Q22: (25% probability): Gold at $2,100/oz
- Our
downside economic scenario would be bullish for gold as central banks
around the world would have to keep monetary policies highly
accommodative
Weekly candles, gold:
Feel free to add your gold outlook in the comments!
www.forexlive.com