Gold prices to average $1,9450 in Q1 - Soci?(C)t?(C) G?(C)n?(C)rale
(Kitco News) -The gold market has broken out after five months ofconsolidation, and commodity analysts at Soci?(C)t?(C) G?(C)n?(C)rale see the potential fora significant rally through the first quarter of 2022.
In its latest price forecast, the French Bank said that U.S.monetary policy will continue to support prices as inflation pressures rise.
“The Fed seems to be reluctant to increase interest ratesany time soon, this combined with high inflation create the perfect mix ofnegative real rates for gold,” the analysts said.
In its updated forecast, Soc Gen sees gold prices averagingaround $1,950 an ounce during the first quarter of next year. The bank’saverage price target represents a 4.5% gain from current prices. December goldfutures last traded at $1,866.90 an ounce, relatively unchanged on the day.
Last week, gold prices saw their best price gains since May,pushing above $1,850 an ounce as U.S. Consumer Price Index saw an annual riseof 6.2%, its most significant increase in more than three decades.
While Soc Gen expects inflation to fall from current levels,the economics expect price pressures to remain above trend through 2022. Thebank sees inflation rising 4.4% this year and 3.7% next year.
Although the bank is bullish on gold for the start of theyear, the analysts said that prices should start to cool in the second half.
“Inflation is expected to retreat in the second half of nextyear while interest rates slowly increase. The U.S. real rates should turnpositive again by the end of 2022 and see gold goldilocks moment passing,” theysaid.
The analysts said that on the upside, if inflation persistsand economic activity starts to slow, gold prices could push above $2,000 anounce by the second quarter and remain elevated through 2022.
The analysts reiterated that investment demand forgold-backed exchange-traded funds (ETFs) remains the critical component tounlocking the precious metal’s value.
“Our conviction is mainly pinned to our expectation that theETF outflows will cease, and we will begin to see some moderate inflows by theend of the year and into the next one,” the analysts said. “For 2022, we expecta total 300t inflow into gold ETF, mostly focused on the first half of the yearand inflation risk will still be in the spotlight. This will be enough tosignificantly drive gold price but also much lower compared to the 408t and874t experienced in 2019 and 2020 respectively.”
Soc Gen added that they also see the potential for centralbank gold demand to support gold prices.
“In a world becoming more multipolar and with the U.S. debtballooning, the U.S. dollar as a reserve currency is losing credibility andcentral banks are keen to diversify away from it, building up gold reserves,”the analysts said.
By Neils ChristensenFor Kitco News
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