As gold continues to be supported by geopolitical tensions, more hawkish central banks around the world are putting new pressures on the yellow metal, enough to potentially have it end the year below $1,200, says one analyst.
“Our formal forecast for gold sees the precious metal ending the year down at $1183,” global head of market strategy at Westpac, Robert Rennie, told Kitco News in a telephone interview Thursday.
Gold is facing a few headwinds as it begins to trade in the second half of the year, particularly coming from global monetary policy.
“The Fed is clearly on the path to continue to normalize monetary policy. And as we go into July, there will be increased focus on the Bank of Canada, after Senior Deputy Governor Carolyn Wilkins raised risks around a possible hike at its July 12 meeting. On top of that, on Wednesday, the Bank of England’s chief economist Andy Haldane certainly increased the risks of the central bank raising monetary policy rates this year as well,” he said.
Rennie’s comments come as markets continue to digest the Fed’s recent move to raise interest rate by 0.25% and announced plans to shrink its $4.5 trillion balance sheet.
BoC’s Wilkins also gave a “hawkish” speech about Canadian economic growth, hinting of a possible rate hike. “As growth continues and, ideally, broadens further, (the bank’s) governing council will be assessing whether all the considerable monetary policy stimulus presently in place is still required,” Wilkins said in a speech last week.
And BoE’s Haldane said on Wednesday that he was likely to support an interest rate hike later this year. “Having weighed the evidence, I think that the balance of risks associated with tightening -- 'too early', on the one hand, and 'too late' on the other -- has swung materially towards the latter in the past six to nine months,” he said in a speech.
Rennie pointed out that none of these factors are particularly supportive for gold.
“The risks are that the period of weakness in gold could continue. A break down below $1,245 could lead to a fall below $1,230 and a possible retreat further down to as low as $1,210,” he said.
Reference: Kitco
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