Gold Price Forecast: XAU/USD to perform more strongly as the Fed pivots – SocGen
|The Federal Reserve is set to pivot. What is uncertain is the timing and the pace at which Fed will have to reverse the rate hikes. Gold is the favourite asset for strategists at Société Générale ahead of a Fed pivot.
Prefer gold over long-duration equities
“The obvious question is ‘will the Fed pause its rate hikes?’ and the answer is almost certainly yes. We think the likelihood of the Fed pivoting and reversing the rate hikes is a likely scenario at the earliest in Q2 next year when we expect the core inflation will already start falling below 4%.”
“To position for the Fed pivot, instead of buying US equities, we think defensive assets such as gold are preferable, as we expect them to outperform first. The main reason is that the earnings growth outlook for US stocks will likely get worse in 1H23 on back of a strong USD, a weaker oil price, and the likelihood of continued economic slowdown.”
“In the short-term, gold could continue to suffer from higher real yields, themselves pushed up by further Federal Reserve rate hikes.”
“We may think of increasing our gold exposure further, as even our most bearish forecast, at $1,550, is not too far off current levels.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.