Everyone’s favourite defensive precious metal has given the $US2000 per ounce level a nudge in recent times, but with US rate rises on the cards, the traditional macro headwinds to the gold price look to be strengthening.
As always it’s not a uniformly held view, with Dow Jones reporting that Lawrence Lepard, managing partner of Equity Management Associates, is betting that gold will hit $US3000 within the next two years as investors race towards “sound money” in times of high inflation.
But RBC Capital Markets, whose “proprietary gold price model leverages machine learning to determine the five most influential gold price factors from an extensive list of market and price data’’ has a more measured outlook, predicting the gold price will soften from current levels to $US1889 this year and $US1795 per ounce in 2023.
These are both 9 per cent increases and the broker has, as a result, bumped up its ASX gold equity stock price targets by an average of 21 per cent. However, the forecasts are still well shy of the current $US1920 or so per ounce that gold is fetching.
“In response to high inflation, market expectations now outline a total eight Fed rate hikes by March 2023, representing a sizeable shift in monetary policy,’’ RBC says. “Market expectations are largely consistent with the Fed’s median survey expectations. Real yields have historically shown a strong inverse correlation, suggesting spot gold should fall.’’
Analysts at Macquarie agree, telling clients in a recent note: “It’s certainly possible that events derail this path of rate rises, eg if there were a broad equity market correction, but the gold price will become progressively more vulnerable to a correction if the Fed appears able to raise real rates without stalling the economy.’’
Morningstar is expecting gold to average $US1970 per ounce from 2022 through 2024, “based on the futures curve, up from $US1470 previously’’.
RBC’s top picks in the sector are Northern Star Resources and Regis Resources, where it has price targets of $13.50 a share against $10.73 and $3 against $2.15 respectively.
Macquarie also likes Northern Star, while among the juniors its analysts favour Bellevue Gold and De Grey Mining.
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