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Gold is having a hard time constantly balancing between a temporary growth and another decline. Experts are concerned about such fluctuations and are afraid that the precious metal will continue its downward trend.
The current monetary policy of central banks aimed at printing additional money to cover government debts greatly supports the yellow metal. According to Michael Gentile, a major investor and analyst, governments in a number of countries are heavily indebted and willing to drive inflation, but are unable to finance high interest rates. He is sure that this is a strong impulse for gold. According to him, most investors are focusing on raising interest rates, considering it necessary to sell gold, as it does not generate interest income. However, the fact that governments are unable to meet their financial obligations is fueling inflation and lower interest rates. Thus, this will support the gold market In the future.
Recently, gold has recovered its previous losses, but is still under pressure amid improving global economic outlook. This is because investors do not want to escape into gold, counting on economic growth and relying on other assets. In this situation, gold's price started to plummet. On Friday morning, it was trading in the range of $ 1740-$ 1741 per troy ounce. It can be recalled that it pulled back from local highs near $ 1,750 per ounce after the Fed meeting. But now, it is making a correction on the wave of rising US government bond yields. Experts highlighted that the increase in the yield of US debt securities prevents gold's quotes to rise.
The decline in demand for precious metals contributes to the Fed's "dovish" mood, due to positive forecasts for US GDP. It is fair to note that this indicator was revised up (from the previous 4.2% to 6.5%) for this year. This week, gold received support amid the collapse of the US stock market, but it was only temporary. A positive aspect in this situation was the reduction of pressure on the precious metal quotes from the growing yield of US government bonds.
Analysts believe that gold's dynamics is quite disappointing, so we should not expect its active growth. Moreover, a lot depends on the current Fed monetary policy in the near future. The adoption of a stimulus package in the US, amounting to $ 1.9 trillion, also negatively affects gold. According to experts, investors do not consider the precious metal as a protective asset, while negative factors prevail on the gold market. In this case, experts stressed that a similar situation may last until the end of the first half of 2021.In the short term, the consolidation in the "gold" market will turn into a correction. This will trigger a drop in the price of the precious metal to $1,600 per 1 ounce. According to the calculations of Deutsche Bank's analysts, such a scenario may be implemented in the near future. In addition, its experts lowered their forecast for gold to $1,500 per 1 ounce.
According to them, the price of gold will decline amid the reduction in investment demand. It can be recalled that the peak in demand for investment gold was recorded at the height of the COVID-19 pandemic in 2020. Currently, it has gone into decline, while gold's demand has fallen by almost a third. At the moment, experts are recording a downward trend in investment demand for precious metals, which may increase in the near future.
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