Gold is not healthy. In 2022, the cost of precious metal briefly exceeded the level of $2000 per ounce, after which it quickly dropped to below $1900. The yellow metal has been hit by the Fed's decision to raise interest rates.
Mark Desormeaux, senior economist at Scotiabank (Canada), is confident that gold prices will rise, even despite the recent drop of more than 5% from $2,000. The expert predicts that the average annual rate of precious metal will be about $1900 per ounce. According to Desormeaux's previous forecast, the annual average should have stayed at $1,800. The expert added that precious metal may fall in price due to an increase in the Fed's interest rate and a possible reduction in the balance sheet of the US Central Bank by $95 billion.
At the same time, Desormeaux stressed that although the Fed intends to raise interest rates in the future, the inflation rate will remain high. The expert believes that the Fed will not adhere to the too aggressive course of monetary policy until the end of this year, fearing a significant slowdown in economic growth. This circumstance, in turn, will keep inflation at a high level. In addition, the acceleration of inflation will be influenced by the rise in commodity prices. Nickel prices are expected to rise 50% this year, with average oil prices around $103 a barrel. Given all these circumstances, the expert is confident that gold will be in demand among investors as a hedging tool. Desormo also added that this year a relatively high rate of precious metal will be maintained due to the ongoing Ukrainian crisis. All these factors will help strengthen the precious metal.