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Feb 29 - 12:55 PM

ANZ: Upbeat Gold Outlook Amid Rate Cut Speculations and Geopolitical Tensions

By eFXdata  —  Feb 29 - 10:45 AM

Synopsis:

ANZ presents an optimistic view on gold, predicting that prices will average above USD 2,000/oz this year, despite market anticipations of early and substantial rate cuts by the Federal Reserve, which are not expected until the second half of 2024. The analysis highlights the impact of steady interest rates and potential for short-term real rate increases as a challenge for gold. However, recent geopolitical tensions and a significant drive by central banks to diversify reserves into gold underscore a robust demand outlook for the precious metal.

Key Points:

  • Rate Cut Speculations vs. Reality: The market's expectations for immediate and significant rate cuts may buoy gold prices in the short term. However, ANZ anticipates the Federal Reserve will hold off on easing until the latter half of 2024.

  • Geopolitical Tensions Fuel Demand: The recent escalation in Middle East tensions has sparked a surge in demand for gold as a safe-haven asset. ANZ suggests that the inclusion of a risk premium in gold prices is likely to persist, reflecting the "new normal" of heightened geopolitical risks.

  • Central Banks' Gold Buying Spree: Central banks have aggressively increased their gold reserves, purchasing 800 tons in the last three quarters, surpassing ANZ's expectations. The bank has revised its gold demand forecast upwards to 1,050 tons for 2023 and 800 tons for 2024, highlighting a continued trend of reserve diversification amid geopolitical uncertainties.

Conclusion:

ANZ maintains a bullish stance on gold, underpinned by ongoing central bank purchases, geopolitical tensions, and market dynamics around Federal Reserve rate cut expectations. Despite potential short-term headwinds from real rate movements, the long-term outlook for gold remains positive, with prices projected to average above USD 2,000/oz throughout the year.

Source:
ANZ Research/Market Commentary

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