Gold prices continue to be "stuck" in a wide sideways band and under pressure from short-term inflation concerns, thereby strengthening "hawkish" interest rate expectations. However, an international investment organization still forecasts that gold prices will end the year above the 5,000 USD/ounce mark.
In the latest precious metals report, Mr. Lorenzo Portelli, Head of Multi-Asset Strategic at Amundi Investment Institute, said that the current energy shock due to the conflict in Iran is likely to only affect inflation in the short term.
In the next 12 months, we will still maintain a positive outlook on gold and believe that the price may reach the 5,500 USD/ounce zone" - Mr. Portelli said.
Although energy prices increased sharply due to instability in the Middle East, pushing annual inflation to the highest level in two years, at 3.3%, core inflation still only increased moderately, about 2.6% in the past 12 months.
Although core inflation is still higher than the US Federal Reserve (Fed) target of 2%, there are no signs of acceleration.
Core inflation is still better controlled, thereby reducing pressure on central banks to pursue a more'hawkish' monetary policy stance. In our opinion, the inflation boost caused by the energy shock is likely only temporary rather than prolonged," Mr. Portelli said.
In addition, Mr. Portelli emphasized that investment demand for gold does not only depend on US interest rates. With gold prices having fallen by about 15% compared to the historical peak in January, most of the negative information has been reflected in the price.
Demand from central banks is expected to remain high, especially in emerging economies that are continuing to diversify foreign exchange reserves, reducing dependence on traditional currencies. We do not think this trend will reverse in the near future. Gold remains a strategic asset for reserve managers to reduce dependence on the USD and increase portfolio resilience," he said.
At the same time, increased public debt and liquidity issues in the private credit market are also expected to boost cash flow into tangible assets such as gold, even if prices remain volatile in the short term.
In the short term, some central banks may use a portion of gold reserves to support the domestic currency in the context of increasing volatility, including risks from geopolitical tensions in the Middle East. However, these moves should not be understood as signs of structural changes away from gold, but only reflect short-term policy management in a volatile environment," he said.
Overall, we still assess gold as a valuable haven asset. Although not a defensive tool for all market shocks, gold is still an effective means to protect against systemic risks, currency weakening and policy uncertainty.
