FX.co ★ Long-term Gold Price Forecast from Capital Economics

Compared to the opinion of analysts from the joint research company ANZ Research covering Australia, New Zealand, and Asia, Capital Economics analysts hold a different view regarding gold. They believe that by the end of 2023 gold prices will fall to $1900 per ounce. This is due to the continued growth of the U.S. economy and the weakening inflationary pressures.

They stated that, according to data from the World Gold Council, in the first half of this year, there was approximately a 5% decrease in annual demand for gold. This decline was mainly attributed to reduced investor demand through exchange-traded funds (ETFs), while the supply increased slightly.

According to Capital Economics' forecasts, the further decrease in gold prices will occur because of reduced investor demand for gold as a hedge against a severe economic downturn and high inflation. Capital Economics analysts anticipate that by mid-2024, inflation in the U.S. will approach the Federal Reserve's target of 2%.

The analysts also noted that since the beginning of 2022, gold prices have surprisingly remained stable, even as interest rates increased significantly. They suggest that investors, having increased their gold holdings in ETFs, were reluctant to reduce them as interest rates rose. This position is maintained due to significant economic uncertainty.

Furthermore, in the second half of this year, according to Capital Economics analysts, the combination of high gold prices and the weakness of the Chinese and Indian currencies in terms of the U.S. dollar will put pressure on the demand for jewelry.

In summary, they predict an overall decrease in gold prices by the end of the year.