In a report released last week, Bernard Dahdah, head of precious metals research at Natixis, raised his price forecast for gold, stating that the yellow metal could reach $ 1,950 an ounce by the second quarter of next year.
The analysts’ expectation that the Federal Reserve will introduce interest rate control in September should continue to support prices in the first half of 2021. However, he believes that price increases will be limited since inflationary pressures should remain subdued.
According to the international bank, a rate curve control in connection with inflation should drive real interest rates into negative territory and make gold an attractive safe haven. “However, we would like to point out that inflation is unlikely to rise significantly (it peaked at 2.2% in the second quarter of 2020),” said Dahdah.
Global economy will remain fragile
He further explains that the global economy will remain fragile longer than expected due to the economic impact of the COVID 19 pandemic. However, the economic conditions that support current monetary policy and weigh on economic growth should also limit inflation, which in turn may affect gold.
While Natixis is optimistic about gold for the next 12 months, the performance of the precious metal could deteriorate in the second half of 2021. “Rising yields in the second half of 2021 are likely to lower gold prices, especially when the pandemic is ultimately brought under control,” said Dahdah.