Don’t let the temporary lull in price action fool you, the Australian bank ANZ has warned. It says the gold bulls remain in control and it remains pro gold in both the medium and long term.
In their latest outlook bank analysts acknowledge that the world’s largest economy may pull of what looked to be an impossible task and avoid a recession – but say that won’t hinder gold’s ability to reach record new highs.
Hidden amongst the data and ever-changing tide of sentiment remains a solidly supportive foundation for the yellow metal. ANZ’s senior commodity strategist Daniel Hayes says there is most definitely medium and longer term supportive factors for gold, if you look beyond the headlines.
“The US economy remains resilient, as evident in strong economic data. Moderating inflation and strong labour data present an ideal macroeconomic balance. As a result, the market has pushed out the possibility of a hard landing,” he explained. But he goes on to add that the bigger picture tells a different story, noting, “We believe the Fed is near the end of its hiking cycle, the USD remains in a structural downtrend and tightening credit conditions could be an economic risk. These present a supportive backdrop for gold.”
What’s more, ANZ refuses to rule out the prospect of a recession entirely, a scenario which also supports higher gold prices going into 2024. As many other analysts have noted, the full impact of the Federal Reserve’s rate hikes may not yet have been fully experienced, with lingering aftershocks still a possibility.
Hayes added, “While the probability of recession has decreased, the risk of an economic downturn is not completely off the table. Tighter credit conditions and softer demand for credit are normally associated with a risk of recession. Should this materialise in 2024, we expect investors to start hedging this economic risk by increasing their gold holdings.”
ANZ expects to see gold prices hit £1,652 ($2,100) by the end of Q1 2024. The landscape is also likely to shift quickly in the near term, “We believe investment demand could quickly pick up once the market either gets confirmation on the pause of interest rate hike cycle or economic growth disappoints,” Hayes cautions. This means that you can’t afford to take a ‘wait and see’ approach. Position yourself for success.
