Gold trades sideways, but long-term outlook seems promising

After passing the $2,000 bar in the spring, Gold experienced weakness over the summer. Economists at Société Générale analyze the yellow metal’s outlook. The precious metal is trading at $1906.69 per ounce at the time of writing.

While core inflation is stubbornly high and short-term headline inflation is still cooling, the Fed is getting close to its cyclical peak. These changes provide the Fed the chance and the duty to keep rates higher for longer to battle inflation as the threat of a US recession diminishes. Real rates will remain high as a result, which, when paired with the current strength of the dollar, generates headwinds that, according to our projections, will maintain gold prices below or near $2,000 through the end of this year.

The necessity to maintain high rates will probably disappear in 2024. The simple victories in putting inflation under control are probably in the rearview mirror, which is consistent with economists’ expectation for energy and particularly for oil.

The key component of economists’ optimistic prediction for gold for the coming year is the flexible Fed funds limitation combined with persistent inflation. Economists expect the dollar to continue to lose value through 2024, which should continue to support commodities in general and gold in particular.