Downgrade of Gold Price Outlook

ABN AMRO Bank have downgraded their gold price outlook, expecting modest weakness for the remainder of 2022, before prices will recover in 2023. The new year-end forecasts are USD 1,700 per ounce in 2022 and 1,900 in 2023.

Georgette Boele, Senior Gold Strategist, says the main reasons for this has been aggressive monetary policy tightening by central banks, a rise in US real yields and a stronger dollar.

Downgrade of Gold Price

Looking forward, Boele expects that developments in the US dollar, in US real yields and central bank policy will continue to dominate the direction in gold prices for the remainder of this year and in 2023. She expects modestly lower gold prices for the remainder of this year. Still expecting the Fed to take the upper bound of the fed funds rate to 4% by early 2023, with the risk that some of that tightening will be frontloaded.

This is slightly above market consensus. This should weigh on gold prices. The gold strategist also expects the US dollar to remain relatively strong. However, she only expects a modest decline in gold prices from the current levels.

This is based on ABN AMRO’s view that they expect the US dollar to remain relatively strong, although they have not pencilled in another strong rally from these already high levels. Secondly, the Amsterdam-headquartered bank thinks that US real yields are close to a peak or have already peaked. As a result, it is likely that this driver will not add substantial pressure on gold prices from current levels.

Third, there is a crucial support area layered at USD 1,680-1,700 per ounce. The analyst expects these levels to be tested again and prices could move below these, albeit only temporary.

Georgette Boele’s new forecast for the end of 2022 is USD 1,700 per ounce (was 2,000).

2023 Gold Forecast

For 2023 gold analyst Boele thinks that the gold price outlook is more positive. Not only does she expect the US dollar to weaken, but also expects the Fed to start cutting rates in the second half of 2023. On top of that, the analyst expects lower US real yields. As a result gold prices are likely to rebound next year, says Boele. The Senior Gold Strategist does not believe that gold prices will set a new high though. This is because other central banks are unlikely to start cutting rates, as they will continue to fight inflation even if their economies deteriorate further. The new year-end 2023 forecast is USD 1,900 per ounce (was 2,000).