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(Bloomberg) — Deutsche Bank AG reduced its gold-price forecasts by as much as 22%, as investors become more wary about the outlook for US monetary policy and investment demand for the precious metal dries up.
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Bullion is now seen at $4,300 an ounce in the third quarter, down by more than a fifth from the prior outlook, and $4,800 in the final three months, down by 17%, Michael Hsueh, a research analyst, wrote in a note. Both of the revised targets still imply prices are expected to gain from current levels near $4,140, although they are markedly less bullish than before.
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Deutsche Bank’s less optimistic outlook echoes a move last week by Goldman Sachs Group Inc., which chopped $500 an ounce off its year-end forecast to $4,900 as it now sees no rate cuts by the US central bank this year.
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Gold has slumped by more than 11% so far this quarter, as the Middle East war initially lifted energy prices, boosting expectations for tighter monetary policy. At its most recent rate-setting meeting, Federal Reserve officials opted to keep policy unchanged but signaled growing support for hikes. At the same time, new Chairman Kevin Warsh vowed to restore price stability.
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“Fed repricing, together with resilient US macro data, has played the primary role in pushing gold lower,” Hsueh wrote. The bank’s fourth-quarter target is based on the view that the Fed will go on holding rates steady, but should there be three to four hikes, gold may fall to about $3,800, he added.
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Continued sales from by gold-backed exchange-traded funds showed that the usual support for the metal is “notably absent,” he said. Meanwhile in China, the metal’s onshore discount to Comex prices suggests imports will not be a support for the market, he said.
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On the positive side, “the one pillar which remains strong is central bank demand, and we expect this to be the case for some time to come,” he said.
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