Following Goldman Sachs, another major Wall Street bank has sharply cut its gold price forecast, signaling that gold prices may struggle to return to their peak in the near term.
As investors grow increasingly cautious about the U.S. monetary policy outlook and investment demand for gold cools, Deutsche Bank has significantly lowered its gold price forecast by as much as 22%.
In a research report, Deutsche Bank research analyst Michael Hsueh wrote that the bank now expects gold to average $4,300 per ounce in the third quarter, down more than one-fifth from its previous forecast. For the fourth quarter, the bank projects gold at $4,800 per ounce, a 17% reduction from its earlier estimate.
He also noted that the persistent net outflows from gold-backed ETFs indicate a notable absence of the buying support that had previously underpinned gold prices. Meanwhile, in China—one of the world’s leading gold-consuming countries—the spot gold price has traded at a discount relative to Comex futures, suggesting that import demand is unlikely to provide market support. On the positive side, however, he stated: “The support factor that remains robust is central bank demand, and we expect this trend to persist for some time.” Wall Street Major Banks Collectively Shift Stance In fact, following the Federal Reserve’s unexpectedly hawkish stance last week, it is not only Goldman Sachs and Deutsche Bank that have changed their outlook; over the past few days, Bank of America, UBS, and Morgan Stanley have also collectively shifted their positions on gold. Michael Widmer, commodities strategist at Bank of America, noted in a report released last Friday that after the FOMC meeting, the likelihood of rate hikes within the year has risen significantly, making a sharp near-term rally in gold difficult to achieve. He stated that the previously set gold price target of $6,000 per ounce has become difficult to realize, given that the current inflation environment remains “unsettling,” which may force further monetary policy tightening. Joni Teves, strategist at UBS, said on Monday that rising yields, coupled with persistent rate hike expectations, are clearly weighing on gold. In her research note, she wrote: “Downside risks to gold prices have increased notably, and the timing of price target realization may be delayed. The duration of the current consolidation phase for gold has become more uncertain.” Morgan Stanley, meanwhile, pointed out that although easing tensions in the Middle East provide some support to gold prices, the impact of the Fed’s hawkish shift is more critical. Amy Gower, commodities strategist at the bank, believes that under the Fed’s hawkish tone, Morgan Stanley’s earlier gold price target of $5,200 per ounce has become significantly more challenging to achieve. On Tuesday, spot gold prices fell sharply. As of the time of writing, spot gold had dropped below $4,100 per ounce, refreshing a nearly two-week low, down 2.19% intraday. After reaching an all-time high of nearly $5,600 per ounce in late January, gold prices have declined by approximately 26% cumulatively.
