According to ANZ Bank strategists, gold is trading at its lowest level since early January below $1,850. A recent repricing of market expectations around the Fed tightening could create a short-term headwind for the yellow metal, they suggest.
In our view, Gold is likely to experience short-term volatility as the market's expectations regarding rates depart from the Fed's outlook. "Unemployment is historically low, and inflation remains above the Fed's target range, which could lead the Fed to remain hawkish for some time to come."
“Gold prices are softening in the physical market as demand in India and China remains weak. Central banks are expected to continue buying gold at a high level."
As a result, investment demand needs to be strong in order for this year's market to clear. This could help to prevent a drop from record levels.
There will be no change to our $1,900 price target for the next 12 months.
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