Gold Price Forecast: Bullish Momentum Wilts After Fake Breakout
The bullish momentum that has seen the gold price rise to all-time highs recently wilted after a fake breakout. The precious metal retreated from recent highs to the lows of the day, with some experts claiming that it could fall even further.
Many market analysts agree that the bullish momentum is likely to continue, although the price of gold may struggle to find support in the coming months. This is due to a number of factors that affect the price of gold, such as interest rate hikes, inflation and the strength of the dollar.
Increased interest rates, especially from the Federal Reserve, can lead to an increased demand for gold as investors seek protection from rising prices and volatile risk-on assets. This would be a positive scenario for gold, as long as the Fed doesn’t raise rates too quickly and as inflation doesn’t rise too fast.
In this scenario, the price of gold could reach as high as $2,500 apiece in 2023 if the global economy continues to recover and only moderate inflation levels are observed. This would be a significant upside to the current price of around US$ 1,800 apiece, according to investment bank Goldman Sachs.
However, the potential for gold to increase to $2,500 apiece hinges on a number of different scenarios and should be assessed with care. This chart shows some of the key economic and geopolitical variables that can impact the price of gold over the next few years.
Firstly, the Fed’s interest rate hikes can influence the gold price significantly, as the Fed will be looking to lift rates to stimulate the economy. In addition, the dovish tone from the Fed’s most recent meeting indicates that it might not be as certain to increase rates in the near future as previously thought.
This is an important factor for gold, as it will help to boost the confidence of investors and make them more willing to invest in gold. It’s also worth noting that investors have a history of flocking to gold during times of high uncertainty, such as when stock markets are in decline and interest rates are rising.
Another key factor that will play a role in the price of gold over the next few years is government debt levels. In the past, when government debt levels have been rising and the demand for gold has fallen, it typically led to a decline in the price of gold.
In contrast, when the ratio of government debt to gold has remained at a constant or higher level, it often leads to a surge in the price of gold. This is a trend that has been present throughout much of the last century, and it’s one that looks set to continue in the future.
Lastly, central banks’ buying of gold has also helped to drive the price of gold. In the past decade, the world’s eight largest central banks have been net buyers of gold, with their combined holdings accounting for almost a quarter of the total amount of gold on the market. This means that if they don’t sell their holdings in the coming years, they will likely continue to buy gold as well, driving prices up.