BAKU, Azerbaijan, August 15. Gold prices are not going to drop below the pre-COVID-19 levels, Trend reports with reference to Fitch Solutions.
“Gold prices are edging close to USD1,800/oz as of August 11 after plummeting below in recent weeks, owing to a slight softening of the US dollar, on the back of renewed concerns about US recession, already priced-in rate hikes and the US consumer confidence level dipping to a 1.5-year low. Nevertheless, gold faces continued downside pressure from rising bond yields as the US Fed delivers on their hawkish stance,” reads a report released by the company.
The report reveals that the safe-haven asset had enjoyed an uptick in demand earlier on in 2022 after the outbreak of war in Ukraine as investors adopted a risk-off sentiment.
“Going forward, we expect US dollar strength and recovering bond yields to cap gold prices. However, prices will not collapse back to pre-Covid-19 levels as gold will remain supported by the evolving Russia-Ukraine war, rising global inflation, and the still persisting Covid-19 pandemic,” the company says.
As for industrial metals, Fitch Solutions’ analysts believe that the price collapse seen over late Q222 and into Q322 has largely run its course, with prices of many key industrial metals stabilising. In terms of demand, downside pressures have now largely been priced in – including from weakening macroeconomic fundamentals and an increase in hawkish rhetoric from the Federal Reserve, which has worked to boost the US dollar and capping demand for commodities priced in dollars.
“As for supply, higher energy prices have limited production at smelters of nickel and zinc, while copper continues to benefit from disruptions to production in Latin America. The past week has seen slight corrections for aluminium (+4.2 percent w-o-w), zinc (+4.5 percent), and lead (+8.2 percent), but due to limited potential for consumption growth in the near term we do not anticipate that this is the beginning of a significant rally for any of these commodities. Meanwhile, continued disruptions to industrial activity from measures to control Covid-19 in China have kept a lid on iron ore and steel prices.”
---
Follow the author on Twitter: @Lyaman_Zeyn