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FutureStarrGold Weekly Price Forecast - Gold Markets Continue to Fall
The gold market is expected to decline in value over the coming weeks as central bank purchases remain low and the US Federal Reserve raises interest rates. Despite these obstacles, gold remains a secure haven for investors.
Gold's price is determined by a variety of factors, such as currency values, inflation rates, interest rates, risk spreads and geopolitical risks. At present there is considerable uncertainty in the markets.
Investors often turn to gold during times of unrest. Not only does it provide protection from market crashes and economic recessions, but it can also help diversify portfolios to protect against stock-related risks.
Gold's safe-haven qualities stem from its physical nature, meaning it cannot be easily manipulated by central banks. Furthermore, gold has long-term value - meaning its quality does not diminish over time.
Gold has long been considered a reliable store of value, and this property makes it an attractive option for those seeking an investment that won't diminish in value over time, according to Gaurav Mathur, founder and managing director of SafeGold, a digital gold platform. "Gold can serve as both physical and financial security," he adds.
He noted that gold can be an asset in a multi-asset portfolio and makes for great addition to ETFs, which offer various levels of exposure to the metal. Furthermore, it serves as a secure foundation from which traders may trade other assets as well.
Another reason gold remains a safe haven is its reliability. It's an excellent conductor of electricity and malleable enough to work with without tarnishing or corroding. Furthermore, gold is an incredibly strong metal; in small amounts it's found in nearly every electronic device from cell phones to GPS units to computers.
Gold remains one of the world's most beloved investments, despite all the financial turmoil we are currently facing. This trend is expected to continue in the near future, making gold an attractive way for people to protect against potential inflation risks.
Also, currency devaluation can be a risk when a country's government increases interest rates and weakens their national currency. This could cause prices to decrease in those countries, potentially impacting consumers' purchasing power.
Gold has always been seen as a safe haven, due to its physicality and invulnerability to central bank decisions regarding interest rates. It also makes for an dependable investment due to its intangible nature that cannot be easily counterfeited like paper currencies can.
Chinese economic growth has been the benchmark of global economic expansion for decades, but it appears to be slowing down due to various factors like Russia's military aggression in Ukraine and high global inflation. China's goal of 5.5% growth this year is no longer realistic; many economists predict China will contract this year - increasing the odds of a recession.
China's Covid Zero policy has caused widespread lockdowns of major cities, which in turn is hampering business activity throughout the country. This has had an adverse effect on manufacturing, tourism and retail sectors while decreasing China's GDP.
Another factor contributing to the slowdown is a decline in property prices. Nearly two thirds of urban Chinese households' wealth is invested in real estate, so any decline there could have ripple effects across other sectors of the economy.
Recent data indicated that home sales decreased in September, suggesting a continued decrease in demand. This could prompt gold bullion prices to increase as people begin investing again due to its longstanding reputation as a safe haven during uncertain times.
Additionally, many investors are turning to gold as a hedge against rising prices due to concerns over inflation. The US Federal Reserve is expected to hike interest rates, increasing risk-aversion and driving stock markets to new highs while also raising inflation expectations in the near future.
J.P. Morgan Commodities Research has slightly decreased their gold forecast this year and now expects it to average around 1,355 U.S. dollars per ounce in 2018, with three rate hikes already priced into the low of $1,200 and annual high of $1,300.
The International Monetary Fund projects the Chinese economy to grow at a slower rate of 3.2% this year, which is slower than its emerging market peers. This is primarily due to the country's numerous challenges such as an outbreak of covid virus, high local government debt and a faltering real estate sector. All these elements combined with ongoing conflict in Ukraine are expected to cause China's economy to slowdown and ripple effects across other regions around the world.
The gold market is subject to various factors that can influence its price development, such as global inflation, the US economy and geopolitical risks. Due to these uncertainties, forecasting gold's future value can be challenging with accuracy.
Despite these factors, many analysts predict the price of gold will increase over the coming year. They also expect it to remain a safe haven asset as investors seek safety.
Gold will remain a secure investment as the world becomes increasingly unpredictable. Unfortunately, it's impossible to accurately forecast how much the price of gold will change in 2022.
Gold is a globally traded product, traded in various currencies. Therefore, it's essential to know how the price of gold will influence different countries and their respective currencies.
One of the primary factors affecting gold's price is demand from consumers, businesses and industrial users. Consumers seek to increase their purchasing power; companies may seek to maintain profits or expand their operations.
In addition to these factors, the US economy and global economic growth have a major bearing on gold's value. Currently, both economies are facing slowdowns - the US's is experiencing an expansionary slowdown while China's is still struggling for expansion.
These factors could all cause inflation to rise and raise the cost of goods. Furthermore, higher interest rates would likely make gold less desirable as an investment option.
The US Federal Reserve has started to raise interest rates, and it appears likely they will continue doing so in the years ahead. This could negatively impact gold prices by pushing up the value of the dollar - which serves as the primary trading currency for gold - up against other currencies.
Furthermore, rising interest rates could spur savings as people look for alternative investments. This would result in lower demand for gold, since its price remains a safe haven and is less volatile than other assets.
Since 2022, the US Federal Reserve has been raising interest rates in an effort to control inflation. It has increased their federal funds rate - which is the benchmark interest rate banks charge each other for short-term loans - eight times within a year and a half.
Interest rate hikes can have a major effect on the economy. They can spur economic growth and reduce unemployment, but they could also stall out an already weakening economy and result in job losses.
When the Fed raises interest rates, it does so to help guarantee inflation stays on track to reach its 2% target. Unfortunately, if rates are raised too aggressively, however, the consequences can be more detrimental than beneficial.
The Fed's tightening policies can drive up borrowing costs and deter businesses from expanding. Furthermore, they could stifle consumer spending and put a dent in the housing market.
Additionally, the Fed's monetary policy decisions have put pressure on other central banks to raise their own interest rates, leading to a "reverse currency war" that has made imports of oil and other items costlier, according to CFR's Brad W. Setser in a recent report.
This rate hike is the eighth in a series of three-quarter point increases that began last March. Although it's less than the 0.5 percentage point increase seen in December, this still signals an return to traditional monetary policy.
Schamotta notes that the Fed appears to be delaying raising rates again, though it could take some time before they do so. This is because there hasn't been enough proof that inflation has reached its peak and inflation is beginning to slip back into their target range of 2%, as expected by some observers.
If the Fed continues to raise interest rates too aggressively, it could further strain the economy and create even bigger problems for America. For instance, higher rates make it harder for consumers to borrow money for major purchases like a home, car or large appliance; they would also increase monthly payments for anyone with credit card debt, which are already increasing.