Gold encounters "total oppression", analysts look at $1,500

The senior precious metals strategist Georgette Boele of ABN AMRO stated in a report: "So far this year, the price of gold has fallen by 7.5%. The outlook for the price of gold remains negative. We maintain our year-end forecast at US$1,700 per ounce by the end of 2022. The forecast is $1,500 per ounce."

The three factors are working together, and the price of gold has been in a downward trend for a long time.

Since June, the price of gold has been in a downward trend. The strengthening of the U.S. dollar and rising U.S. Treasury yields have put pressure on gold prices. In addition, the market has begun to digest expectations that the Fed will raise interest rates faster, as inflation concerns have put pressure on gold prices.

Many analysts attribute the recent fall in gold prices to three main factors: the strengthening of the U.S. dollar and the reduction in the size of bond purchases by the Federal Reserve. The third catalyst is the rise in the yield of 10-year US Treasury bonds. The US 10-year Treasury bond was closed on Monday for a holiday, but yields have been rising recently. The rise in yields is a direct result of market sentiment that the Fed has begun to reduce the scale of asset purchases this year

Boele said: “ Investors have adjusted their expectations of the Fed. They expect the Fed to raise interest rates faster than they had previously expected. In addition, the 2-year U.S. Treasury yield and 2-year real yield have also risen. This reflects this. In addition, the U.S. dollar has appreciated by 5% this year. When the U.S. dollar appreciates, the price of gold tends to weaken."

Many central banks are expected to tighten policies, and gold prospects are worrisome

On the other hand, due to the tightening of global monetary policy and the strengthening of the US dollar, the Dutch central bank is still not optimistic about gold for the rest of this year and next year.

Some central banks have already started actions, such as the central banks of Norway, New Zealand, Brazil, and South Korea. We expect the Fed to start raising interest rates in early 2023, and the Bank of England and the Bank of Canada may raise interest rates before then. Compared with other central banks, the European Central Bank, the Bank of Japan, the Reserve Bank of Australia, the Riksbank and the Swiss National Bank may adjust their monetary policy later, but the direction is to tighten, not relax. Tightening monetary policy is usually bad for gold because it will trigger a rise in government bond yields.

Boele said: " We expect the U.S. dollar to rise further. The gains may be moderate, but a higher U.S. dollar is usually detrimental to the price of gold. "

Diversion of other assets, gold's attractiveness is further frustrated

It is worth noting that the employment report just released last week was far below economists' expectations. This figure is lower than the disappointing August, which showed an increase of approximately 243,000 jobs. The number of jobs in September was about 194,000, which is expected to be between 450,000 and 500,000. Nevertheless, despite the extremely mild economic recovery and few new jobs, the price of gold continues to fall.

Analysts believe that one possible reason for the continued decline in gold is the incredible recognition of the cryptocurrency Bitcoin. Bitcoin futures continue to rise sharply, today they have risen by US$2705, an increase of 4.90%, and the current value of a bitcoin is US$57,885. Bitcoin has been in a rebound mode, which is negatively correlated with lower gold prices. At the beginning of 2021, the trading price of gold futures was approximately US$1,920 per ounce, and the price of Bitcoin was US$40,000. By early March of this year, the price of gold hit a double bottom of about $1,680. The transaction price of Bitcoin is much higher than $50,000.

In addition to the impact of U.S. Treasury yields and the U.S. dollar, as well as the pressure from the central bank's tightening of monetary policy, investors may need to comprehensively consider the attractiveness of stocks and cryptocurrencies for speculative funds to fully understand the overall picture of the downturn in the gold market. On Tuesday (approximately October 12th) in Asian markets in early trading, spot gold prices continued to decline slightly and are currently approaching $1,750 per ounce.


(Spot gold daily chart)

GMT+8 At 09:11 on October 12, spot gold was quoted at $1754.71 per ounce.