Economists at ANZ Bank believe Gold’s recent price rally is ahead of fundamentals. A steady rate and falling inflation could see real rates rising, capping the rally in the short-term.
Q1 2024 forecast lowered to $1,950
Softening US economic data and moderating inflation suggest that the Fed’s monetary policies are restrictive enough to return inflation sustainably to target.
The Fed’s shift in stance surprised the market, lifting the Gold price to a record high of $2,135. This looks excessive against our view of the easing cycle starting from H2 2024. This could curb the upward momentum. Upside risk for real rates looks elevated as the Fed funds rate remains steady and inflation falls.
We estimate real rates will rise by 100 bps, presenting a downside risk for Gold due to the rising opportunity cost of holding a non-yielding asset. Therefore, we lowered our forecast to $1,950 for Q1 2024.