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The gold market is consolidating just below $1,700 after prices hit a fresh seven-year high Tuesday. Although bullish sentiment remains strong in the gold market, one analyst is warning investors that the second quarter could still be difficult for the yellow metal.

In a report published Tuesday, Bernard Dahdah, precious metals analyst at Natixis, said that he is bullish on gold and sees higher prices by the end of the year; however, he warned that there could be more forced liquidation in the gold market during the second quarter.

“We could see further sharp drops in the U.S. equity market, with our strategists forecasting a further 15% slide in between now and June. The worse is still not behind us and we therefore see further downside in the coming weeks,” said Dahdah.

However, looking past the short-term volatility, Dahdah said that he expects gold prices to average $1,850 an ounce in the fourth quarter. He said that he sees gold prices averaging $1,790 an ounce for 2020; he has also boosted his 2021 average price forecast to $1,823.

Looking at the economic toll, the coronavirus is taking on the U.S. economy, said Dahdah, noting that his firms expects defaults and bankruptcies to rise more than 9% this year, even as governments continue to throw money into financial markets.

“Bankruptcies will inevitably happen which will ultimately lead to an irreversible loss of capital and potential GDP,” he said.

Dahdah added that deflationary pressures and weak economic growth should prove to be supportive for gold throughout 2020. In the current environment, he expects the Federal Reserve and the European Central bank to keep interest rates at extremely low levels until at least the third quarter of 2021.

“This will keep the opportunity cost of holding gold low,” he said.

Another factor the commodity analyst is watching is mine supply. A significant portion of mine production was shut down last month as governments halted all non-essential businesses in an effort to stop the spread of the coronavirus. Reduced supply should continue to support prices, Dahdah added.

Natixis provided a mixed outlook for central bank demand, stating that demand will be weak in 2020 as countries focus on keeping businesses solvent. However, Dahdah noted that the official sector demand should pick up next year.

“Into 2021, we could see Central Banks making further efforts to diversify away from the dollar and into gold. Moreover, a sharp rebound in oil prices would potentially see the Central Bank of Russia return to the gold market,” he said.