Commodity analysts at JP Morgan Global Research said that the gold market will not be able to resist the Fed's plan to tighten monetary policy in 2022.
In a recently published forecast for 2022, the bank expects gold prices to decline to pre-pandemic levels by the end of next year.
The forecast is due to the fact that the Federal Reserve plans to stop monthly bond purchases by March 2022 and intends to raise interest rates three times.
However, JP Morgan expects the US central bank to raise interest rates in September. The determination of gold prices is the bank's forecast regarding the growth of bond yields, as long-term inflation expectations remain strong.
In addition, JP Morgan Bank's analysts said that the US dollar is expected to rise by 1.6% next year.
Looking at economic growth forecasts, analysts predict that the global economy will grow to 4.8% next year, and the US economy will grow by 3.8%.
According to the Head of Global Commodities Strategy at JP Morgan Natasha Kaneva, the constructive economic forecast, depleted reserves, and supply, which still cannot meet growing demand, indicate that there will be positive double-digit profit margins on commodities for the second consecutive year in 2022.
The Bank is also optimistic about oil prices ahead of the New Year.
Kaneva's report revealed that previous consumption was as high as forecasts for next year, U.S. shale drilling production was at its breaking point, and the Organization of the Petroleum Exporting Countries (OPEC) and its allies were engaged in a battle for market share.