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Looming Rate Rises to
Keep a Lid on Gold Prices

Analysts have trimmed their gold price forecasts for the rest of this year and next, expecting the precious metal to hover around current levels in the fourth quarter before edging lower in 2022, according to a Reuters poll. Typically seen as a safe investment, gold performs well when investors are anxious and when returns on other assets like bonds are low.

Prices leaped to record highs above $2,000 an ounce last year as the coronavirus spread, but fell as economic growth recovered and central banks began to signal interest rate rises that would push up bond yields.

A poll of 37 analysts and traders this month returned a median forecast for gold to average $1,795 an ounce in the fourth quarter of 2021, in line with current prices and up from its average of $1,770 in the third quarter.

The poll forecast an average price of $1,750 an ounce in 2022.

A similar survey in July predicted averages of $1,841 an ounce in the fourth quarter and $1,785 in 2022.

Bullish analysts pointed to solid demand for gold from retail investors, jewellers and central banks. They said prices could increase if rising inflation fuels demand for gold as a hedge.

But gold is unlikely to rise much while investors expect the U.S. Federal Reserve to reduce its asset purchases and raise rates, "both of which are events that traditionally see gold prices put under pressure", said Mooris Tjioe at Phillip Futures.

For silver, the Reuters poll forecast average prices of $24 an ounce in the fourth quarter – roughly in line with current levels – and $23.95 in 2022.

The poll three months ago predicted averages of $26.13 for the fourth quarter and $25 for 2022.

Silver is a 'safe-haven' asset like gold but is also used by industry.

"Silver remains under pressure from its industrial exposure and the impact of the ongoing semiconductor shortage, which is limiting output of a range of silver-containing electrical items including cars, smartphones, and televisions," said independent consultant Robin Bhar.

"It should continue to underperform," he said.

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