Gold Price Forecast: XAU/USD to extend its declining trend due to three reasons – ABN Amro

Gold (XAU/USD) has declined by 7.5% so far this year. Strategists at ABN Amro think that the gold price outlook remains negative. Therefore, they keep the XAU/USD year-end forecast at $1,700 per ounce and end of 2022 at $1,500 per ounce.

Monetary policy will tighten globally going forward 

“We expect the Fed to start hiking early 2023 and the Bank of England and Bank of Canada to probably hike before that. The ECB, the Bank of Japan, the Reserve Bank of Australia, the Riksbank and the Swiss National Bank will likely hike later compared to the other central banks, but the direction is towards tightening and not easing. Only in China has the central bank been easing in piecemeal steps to support the economy. Tighter monetary policy is in general negative for gold prices, also because yields on government bonds have a tendency to rise.”

US 2y real yields to pick up

“There are two dynamics at play here. First, we expect the 2yr US treasury yields to rise a bit more than what markets are now expecting. Moreover, we think that inflationary pressures will ease. This results in higher 2y US real yields and that will weigh on gold prices going forward.”

The US dollar to rally a bit further

“This will likely be a modest increase. Higher US dollar is generally negative for gold prices.”