The Federal Reserve’s hawkish monetary policy stance is impacting the gold market, leading Bank of America to downgrade its average annual gold price target. The bank now predicts that gold prices will average around $1,923 an ounce for the year, down more than 4% from their previous estimate. The analysts believe that gold will remain capped for now due to potential policy rate increases and investor preference for rising bond yields and a stronger U.S. dollar.
Speculative interest in gold futures and gold-backed exchange-traded products has decreased recently, and the analysts stated that gold prices are unlikely to rally until assets under management in these vehicles increase. They also noted that central banks continue to increase their gold holdings, providing some support to the market.
Bank of America is slightly more bearish on silver, downgrading its average silver price forecast to $22.89 an ounce. The analysts attribute this to weak traditional industrial demand and the expectation that the global economy will not bottom out until 2024. However, they believe that once buyers return to the market, silver should start outperforming gold.
Platinum and Palladium Outlook
Bank of America is most bearish on platinum, with a 10% decrease in its price forecast. The analysts expect platinum prices to average around $1,068 an ounce for the year. Platinum prices are currently testing support around $900 an ounce. As for palladium, the bank forecasts an average price of $1,391 an ounce for 2023, down more than 8% from their previous estimate. Palladium is trading at $1,237.50 an ounce.
Base Metals Outlook
Bank of America has downgraded its forecasts for all base metals due to headwinds from a slow normalization of activity in China, tighter monetary policy, and a global manufacturing recession. However, they see the most potential for copper, citing the offsetting demand from the green revolution and increased policy support in China. The analysts also see growth potential in molybdenum, raising their price forecast to $24.40 per pound.