Commodities, Finance, Gold, News

It’s not all doom and gloom for gold


The gold price has been trending south ever since its March highs, and while the near-term outlook is bearish the precious metal is expected to trade above pre-COVID levels in the long term.

It’s easy to forget that entering 2020 – the year COVID-19 took control – gold was trading below $US1500 per ounce.

Gold thrives on global uncertainty, so when the pandemic tightened its grip the commodity responded accordingly, surging above $US1600 for the first time in seven years in late February 2020.

The precious metal then notched $US1700 before scaling $US1800 per ounce in July 2020.

Independent analyst Ross Norman told Reuters at the time that gold would be nudging $US2000 by the end of 2020. It only needed one more month to achieve this milestone, however, rising above $US2070 for the first time ever.

The reason?

Investors flocked to gold as a safe haven amid the economic turmoil of COVID-19, opting for assets that could maintain their value.

Despite the March rush, Gold has cooled since its 2020 highs and was trading at $US1712.50 ($2521.8) at close on September 2, according to the World Gold Council.

In a recent report, Fitch Solutions said it is “neutral to bearish” towards gold prices for the rest of 2022, with the commodity navigating competing economic forces as myriad risks surround the global economy.

“On the one hand, gold remains above its pre-COVID levels as it continues to be supported by rising recession risks, the still-evolving Ukraine war, risks to the mainland Chinese economy on the back of its zero-COVID policy, and the still persisting COVID-19 pandemic,” Fitch said.

“On the other hand, significant pressure on prices is stemming from the US Fed’s aggressive hiking and rising real bond yields, a stronger for longer US dollar, likely peaking of inflation in Q3, as well as the continued easing of restrictions as vaccination rates continue to rise.”

Fitch expects the precious metal to average $US1800 per ounce in 2022 and 2023, before cooling to $US1700 in 2024 and $US1610 in 2025.

While this might seem like a significant decline, it’s still higher than pre-COVID levels, with Fitch suggesting gold will be supported as long as the pandemic exists and geopolitical crises, such as the Russia–Ukraine conflict, continue to remain.

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