Gold price surged by $30 immediately after the Fed’s meeting on Wednesday evening and reached $1,960 the following day. Economists at Commerzbank see upside risks to their XAU/USD year-end forecast of $1,850.
US interest rate outlook to remain the more important driver
“The US interest rate outlook is likely to remain the more important driver in the medium term.”
“There is still a substantial discrepancy between the market’s expectation and the Fed’s view of the inflation trajectory and the corresponding interest rate trajectory. Since Wednesday, however, the probability has increased that the Fed is shifting more toward the market’s view. This results in an upside risk to our Gold price forecast of $1,850 at year’s end.”
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Investors worldwide keep a close eye on gold prices, as the asset is highly sought after due to its value. Currently, the recent rebound of gold prices has increased the expectation of an increase even further. In a recent forecast, Commerzbank, one of Europe’s leading banks, has suggested that gold prices could reach as high as $1,850 per troy ounce by the year’s end.
Commerzbank believes that this increase in gold prices is due to a number of factors, including a possible extension of the U.S. stimulus package, monetary expansion from central banks and diminishing faith in currency. The bank also suggested there will be an increased demand for gold, as it is seen as a safe haven asset that is traditionally used to protect against economic and political uncertainty.
In addition, Commerzbank believes that the recent technological advancements in gold extraction have been a major factor in the current surge of gold prices. These advancements have made it easier and more cost-effective to extract gold from existing sources, which has allowed for a greater supply of gold and an increase in the price per ounce.
Overall, Commerzbank is confident that continuing to increase the risk of an upside move in gold prices this year. Current market conditions are creating a favorable climate for gold demand. It is also possible that if the current volatility in the markets continues, that investors will continue to flock to gold as a safe haven asset, further increasing the price.
At the same time, there is also the possibility of downside risks to this conclusion as well. If the U.S. government decides to delay or pull back on any possible stimulus packages, the demand for gold could be reduced and the price could fall. Additionally, a rise in the U.S. dollar could also lead to a decrease in gold prices.
In conclusion, it can be seen that Commerzbank’s prediction of a $1,850 forecast for gold at the end of the year is largely based on the expectation of further economic and political uncertainty. Whereas there is a potential upside move in gold prices, investors need to keep an eye on any changing economic conditions to ensure they are able to make the most of any potential increases.
