Gold Price Outlook
“Gold Price Outlook
Gold prices declined sharply during September, in line with other assets. At the end of the third quarter of this year, all markets seemed overstretched one way or another. Some like the dollar were overbought; most others were oversold.
A couple of macroeconomic releases early in October, which suggested some softening in the U.S. economy, were used as reasons to believe that the Fed may turn less aggressive in its stance toward monetary policy going forward. It is a little premature at this time to jump to that conclusion. A variety of data would need to show consistent softening before the Fed alters its course. Nonetheless, various oversold markets, including gold, snapped their losing streaks and rose sharply for at least two days in the first week of October.
There are various reasons to believe that the fourth quarter will be kinder to gold than the preceding two quarters of this year. For one, a lot of the negative impact of tighter monetary policy is already priced into asset prices, unless there are signs that inflation is not abating and the labor market is not loosening, which would lead the Fed to tighten policy further. Additionally, there are still various political issues around the world that are supportive of gold prices, be it China’s National Congress meeting in the middle of October, U.S. mid-term elections in early November, or ongoing tensions and sporadic escalation of tensions between Russia and the West over Ukraine. The last quarter of the year also sees seasonal strength in prices, due to increased investor and fabricator demand ahead of and during various festivals and holidays around the world.
While there are various factors that are expected to be supportive of prices, positive real rates are expected to act as a headwind to gold prices, preventing any sharp upward move in the absence of any dramatic change in global monetary policy or breakdown in political policy or relations.
Gold prices are expected to spend much of the present quarter vacillating between $1,690 and $1,810."