Gold prices to rise sharply in 12 months, forecasts bullion industry

Gold has fallen about 20% since coming close to a record in March following Russia’s invasion of Ukraine. Tighter monetary policy — particularly by the Federal Reserve — has weighed on the precious metal which bears no interest.

Still, some investors are holding onto bullion as a hedge against broader geopolitical and economic risks, from the war in Ukraine to Covid-19 lockdowns in China.

Gold was little changed today as investors assessed mixed signals including a slightly weaker dollar, rising Treasury yields and more hawkish commentary from a Federal Reserve policymaker.

Bullion has had a tepid week so far, ekeing out modest gains as the greenback’s strength — a major headwind over recent months — fades slightly. Still, the US currency remains a headwind as the Federal Reserve pursues an aggressive monetary policy to battle inflation.

“I tend to think that Fed hawkishness is largely now ‘in the price’,” Philip Klapwijk, managing director of Hong Kong-based consultant Precious Metals Insights Ltd., said in an email. “That said, the scope for a near-term major rebound in gold prices is very limited while rates climb and the US dollar remains strong.”

Atlanta Fed President Raphael Bostic reiterated that the bank is focused on cooling inflation that’s running at its hottest in four decades. Treasury yields traded near multi-year highs ahead of US housing figures for September and the Fed’s Beige Book due later Wednesday.

Gold was flat at $1,651.49 an ounce by 10:34 a.m. Shanghai time. Silver was little changed, platinum fell and palladium gained. The Bloomberg Dollar Spot index was steady.

Expectations of a large Fed interest rate hike were cemented following a red-hot U.S. consumer inflation print last week, with markets pricing in a 75-basis-point hike in November.

Rising interest rates and bond yields dim gold’s appeal as they increase the opportunity cost of holding the non-yielding asset.