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(Kitco News) - The Federal Reserve's solidly hawkish stance on monetary policy is sapping momentum from the goldgold market, with one bank seeing prices holding relatively steady through the rest of the year.
In an update of their price forecasts, commodity analysts at Bank of America have downgraded their average annual price targets for precious metals across the board.
Looking at gold, Bank of America sees prices now averaging the year around $1,923 an ounce, down more than 4% from their previous average of $2,009 an ounce.
"With scope for another two policy rate increases, the yellow metal should remain capped for now," the analysts said.
The analysts noted that rising bond yields and a stronger U.S. dollar are keeping investors away from the market, as both speculative interest in gold futures and gold-backed exchange-traded products have decreased in recent weeks.
"Gold prices are unlikely to rally until assets under management at these vehicles increase. This, however, is unlikely to happen until the Fed reaches the end of the hiking cycle," the analysts said. "Until then, the gold market looks supported at best, also because central banks keep increasing their gold holdings."
The bank's downgrade comes as positive labor market data has weighed on gold, which is currently trading around $1,916 an ounce, down 0.50% on the day..
BofA is slightly more bearish on silver, even as they expect the green energy transition to provide long-term support for the precious metal. Bank of America downgraded its average silver price to $22.89 an ounce, down 6.4% from the previous estimate of $24.55.
"Silver has been trading in a range over the past few months, also because traditional industrial demand has been weak. With the global economy not to bottom out until 2024, this is unlikely to change for now. That said, once buyers return to the market, we believe silver should start outperforming gold," the analysts said.
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Silver is currently underperforming gold with prices trading at $22.68 an ounce, down 2% on the session.
BofA is most bearish on platinum, downgrading the price by 10%. The analysts see platinum prices averaging the year at $1,068 an ounce, down from the previous target of $1,168.
In the current downtrend, platinum prices continue to test support around $900 an ounce, down nearly 1.5% on the day.
In other PGM metals, the bank sees palladium averaging 2023 at $1,391 an ounce, down more than 8% from the previous forecast of $1,520 an ounce.
palladium last traded at $1,237.50 an ounce, down 1.6% on the day.
However, it's not just the precious metal that Bank of America expects will struggle through the second half of 2023. The commodity analysts have also downgraded all base metals. In the current environment, they said that they see the most potential for copper.
"As the second quarter draws to a close, we reduce our price forecasts overall, factoring in headwinds from a slow normalisation of activity in China, tighter monetary policy and a global manufacturing recession. We prefer copper among the base metals, partially because the green revolution has offset the demand drag from housing and increased policy support in China should push the metal higher into 2H," the analysts said.
BofA also sees growth potential in molybdenum, increasing their price forecast to $24.40 per pound, up more than 7% from the previous estimates of $22.70 a pound.
