Gold is expected to fall to 1800 dollars per ounce by the end of the year as the US economy continues to grow, inflation pressures decrease and the dollar index rises.
Since its rise to about 2000 dollars per ounce on safe haven demand (due to concerns about the stability of banks in the US and Europe) in March-May of this year, gold has continued its decline.
According to the World Gold Council, global gold demand fell by about 5% year-on-year in the first half of this year, mostly due to a decrease in investor demand via exchange-traded funds, while gold supply increased slightly.
Further declines in demand for the precious metal are expected, due to low investor demand for gold as a hedge against a sharp economic downturn and rising inflation. “Capital Economics” expects the US economy to contract marginally in the fourth quarter, before recovering next year. They also expect inflation in the United States to fall close to the Fed’s 2% target by mid-2024.
Gold prices have been remarkably resilient since the beginning of 2022 even as real interest rates have risen sharply. One of the reasons for this was that investors, having built up their gold holdings in ETFs to record levels during the pandemic, were reluctant to reduce them when interest rates rose.
This makes sense given that there is a lot of uncertainty about the economic outlook.
They also expect that the weakening of the Chinese and Indian currencies against the US dollar will affect the demand for gold on jewelry during the second half of this year after it fell by 1% year-on-year in the first half of the year.
