By Ashitha Shivaprasad
(Reuters) – Analysts slightly lowered their gold forecasts for this year on the grounds zero-yield bullion would need a catalyst for another run to all-time highs, such as an interest rate cut from the Federal Reserve, a Reuters poll showed on Thursday.
The poll of 36 analysts and traders conducted through July returned median forecasts for gold at $1,950 an ounce in the third quarter of this year, $1,995 in the fourth, $1,944.5 for the full year and $1,988 in 2024.
Three months ago, a Reuters poll predicted prices would average $1,950 in 2023.
“We see a market well supported, with a bias to the upside but unable to muster much momentum for a convincing breach higher to fresh all time highs,” independent analyst Ross Norman said.
As fears of a global banking crisis receded and the U.S. debt ceiling impasse was resolved, gold, considered a hedge against political and finiancial turmoil, retreated by nearly 5% since its surge in early May to a few cents shy of the all-time high hit in 2020.
“A broad-based and longer-lasting economic contraction would be needed to revive the rally and to push prices to record highs,” Carsten Menke, head of Next Generation Research at Julius Baer, said.
Hawkish comment from the Fed and other central banks also drove the retreat since a high interest rate environment prompts investors to opt for assets such as bonds and the U.S. dollar rather than zero-yield gold.
On Wednesday, the Fed raised rates by a quarter of a percentage point, marking the 11th hike in its last 12 meetings, and the accompanying policy statement raised the possibility of another increase.
Standard Chartered (OTC:) analyst Suki Cooper said gold is “more likely to test the downside until rate cuts materialise unless a new catalyst emerges”.
But $2,000 was still a “viable target” for gold on the basis of factors including a likely end to the rate hike and sustained geopolitical tensions, StoneX analyst Rhona O’Connell said.
For silver, the poll forecast average prices of $23.52 an ounce in 2023 and $25.00 in 2024. Silver shed over 5% in the second quarter.
“Anaemic performance from gold and concerns over economic outlook especially in China” have weighed on silver, O’Connell added.
But silver could still find support from solar panels demand, analysts said.
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