Wealth shock delays gold bull market as Goldman revises targets

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Bullion has dropped more than 6% this quarter on rising bets that the Federal Reserve will be more aggressive in its monetary policy tightening path. Goldman economists expect two 75 basis-point hikes over the summer, which could sap US growth, add to fears of recession risks and boost gold investment demand.

“The wealth shock appears to have peaked, and we expect a rebound in emerging market gold demand in the second half of the year,” the analysts said. “In the absence of a large liquidity shock, we view current gold price weakness as a good entry point.”

The bank kept its upside outlook for the gold price but delayed the path by revising its three- and six-month targets to $2,100 and $2,300, from $2,300 and $2,500, respectively. The 12-month target of $2,500 was unchanged. Spot bullion was at $1,813 on Wednesday.

More from the report:

  • Russian domestic gold production will stay inside the country as it faces a surplus of dollars and its central bank aims to prevent excessive appreciation of the currency.
  • Given limited options for investment in foreign assets, the purchase of domestic gold output seems like one of the easiest ways to prevent excessive ruble strength.
  • Global central bank demand is still on track to meet bank’s forecast for 750 tons in 2022.

(By Ranjeetha Pakiam)

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