After record highs, what’s next for gold? ANZ joins the discussion

Investing.com — Gold prices soared to record highs earlier this week before quickly consolidating and settling near the $2,150 per ounce level. Analysts at ANZ Group warned that the yellow metal could fall further in the short term, but raised their year-end bullion targets.

It hit a record high of nearly $2,200 an ounce at the start of the week, buoyed by persistent expectations that the Federal Reserve will start cutting interest rates by June.

But February’s better-than-expected data undermines this idea, and any further recovery in inflation will likely deter the Fed from cutting rates sooner.

Analysts at ANZ say gold’s recent rally has “outpaced macroeconomic and geopolitical developments” and believe the yellow metal is likely to fall to around $2,100 an ounce in the near term. showed that.

ANZ sets year-end price target for gold at $2,300

But ANZ analysts also said they expected U.S. inflation to ease in the coming months, pushing back toward the Fed’s 2% annual rate target and that the Fed is still on track to start cutting interest rates in the second half of the year. Specifically, ANZ expects a rate cut to occur in July.

It raised its year-end price target for gold to $2,300 an ounce from $2,200, implying an upside of nearly 6% from current levels.

ANZ analysts also said falling prices were an opportunity to build long positions, and the recent rally in gold also raised the underlying outlook for the yellow metal.

Gold investment also improves as interest rates fall

Analysts at ANZ said investment demand for gold will be a key driver for the yellow metal in the second half of 2024. Rising interest rates have accelerated the outflow of funds from gold investment products traded in the market since 2022, but he pointed out that these outflows have laid the groundwork. Be prepared for a potential rebound.

“Given that ETF outflows are in response to over a year of monetary tightening, a reversal is likely once central banks start easing. This leaves more room to grow your holdings, creating significant upside potential.”

Physical demand for gold, driven by unexpected demand in China and India, has also been a key driver for the yellow metal in recent months. But ANZ analysts now expect growth in physical demand to slow as consumer spending slows, particularly in China and to some extent India.