World gold price is forecast to decrease next week
Risks from the Fed meeting and the possibility of investors taking profits could drag gold prices down next week.
The precious metal has had a strong start to 2023, posting six straight weeks of gains and currently trading near a nine-month high of $1,927 an ounce. But analysts say investors have yet to jump on the bandwagon.
Despite a more than 5% rise in gold prices this year, data from the world’s largest gold-backed exchange-traded fund, SPDR Gold Shares, shows that demand for gold ETFs continues to decline. As of January 19, SPDR Gold Shares’ holdings had fallen by 5.21 tonnes.
Kitco's survey of analysts, bankers and traders this weekend also showed that 53% forecast prices to fall next week. 16% think prices will rise and 32% expect prices to move sideways.
 |
World gold price developments since the beginning of 2023. Chart:CNBC |
Although most believe that gold prices will increase in the long term, many believe that the US Federal Reserve's policy meeting next week will create many risks in the market. In addition, investors may want to sell to take profits at current prices. For those who want to participate in the market, analysts advise against entering at current prices.
Most analysts believe that gold prices will face selling pressure next week, as the market may be underestimating the Fed's tightening stance. Currently, the market is forecasting a 25 basis point (0.25%) increase in interest rates at next week's meeting and one more hike in March before stopping completely. The Fed is even expected to cut interest rates as early as September.
The Dollar Index has fallen 10% since peaking at 20 in September 2022. The USD has weakened as the market expects the Fed to slow down the pace of interest rate hikes.
Analysts remain bullish on gold in the long term, with Bank of America reporting this week that the precious metal is expected to be a major investment over the next three years.
In November 2022, the European investment fund HANetf also surveyed European citizens and British investment funds. Accordingly, 89% of participants said they planned to increase their gold purchases.
