(Kitco News) - Gold prices have held critical support above $2,300 an ounce as markets look for the Federal Reserve to signal it will maintain its restrictive monetary status longer than expected.
Despite the recent selling pressure in gold, Goldman Sachs is doubling down on its recent bullish call, saying that gold can maintain its bullish momentum even if the Federal Reserve delays its easing cycle.
In a video commentary published Tuesday, Nicholas Snowdon, Head of Metals Research at Goldman, said that gold has less to worry about from the Fed as the inverse relationship between the asset and interest rates has broken down.
“We're seeing a surge in demand from emerging market central banks and from Asian retail investors. But a lot of this has been driven by fear. With geopolitical risk on the rise, central banks are fearful of sanctions and as a result, are buying more gold over dollars and securities,” he said. “Economic uncertainty and currency depreciation fears are driving Asian retail demand for gold.”
Snowdon’s comments come as shifting interest rate expectations have created some volatility in the gold market. Ahead of Wednesday’s monetary policy decision, markets have already priced out potential rate cuts for June and July.
Meanwhile, gold prices have dropped sharply in the last two weeks, falling roughly 6% from their recent all-time highs due to the shifting interest rate expectations.
However, Snowdon noted that despite this downward pressure, gold prices are still up nearly 10% this year. June gold futures last traded at $2,309.70 an ounce.
“We think these are long-term dynamics that will keep a firm bid under gold. So even if rates do stay high, we expect to see continued bullish momentum in the gold price,” he said.
Snowdon’s bullish comments come two weeks after Goldman Sachs raised its 12-month gold price forecast, as the market was trading near record highs around $2,400 an ounce.
The financial firm now sees gold prices rallying to $2,700 an ounce by year-end, up from its previous target of $2,300.
