Following the sharp losses in gold prices in recent weeks, a new forecast came from Amundi, one of Europe's largest asset management companies.
While the company predicts that the ounce of gold could rise at least 10 percent from its current levels and reach $4,500, it announced that it found the possibility of the year-end target of $5,000, which it had previously brought up, to be realized low.
Lorenzo Portelli, Head of Multi-Asset Strategy at Amundi Investment Institute, said that the worst period in the gold market may be behind us.
5 THOUSAND DOLLAR TARGET WAS WEAK
An ounce of gold fell below 4 thousand dollars last week, hitting its lowest level since mid-July.
The precious metal has lost nearly 10 percent of its value since September.
The decline was caused by the spread of sales that started in artificial intelligence-related investments to other markets. Some investors reduced their gold positions to cover their losses in different assets, which also increased the selling pressure.
Inflation data coming in above expectations and expectations that the US Federal Reserve (Fed) might increase interest rates were also among the headlines that pulled gold prices down.
Following these developments, Amundi moved away from the year-end target of 5 thousand dollars, which he had previously expressed, and highlighted the level of 4 thousand 500 dollars as the base scenario.
'THE WORST PERIOD MAY BE OVER'
Portelli stated that investors significantly reduced their positions after the sharp sales last week.
Stating that this situation may pave the way for the recovery of gold prices in the coming weeks, Portelli said that the markets have largely priced in a negative economic scenario for the precious metal.
The scenario in question involves inflation remaining high without a recession in the US economy and the Fed turning to aggressive interest rate hikes.
FED DECISIONS WILL DETERMINE THE DIRECTION OF GOLD
Portelli expressed the view that the current economic outlook does not require interest rate increases beyond the levels currently priced in the markets.
For this reason, the steps the Fed will take in the coming period and expectations regarding monetary policy will be decisive in terms of the direction of gold.
Gold, which does not generate interest, may be negatively affected by the rise in US bond yields. Increasing interest rates may cause assets that offer returns, such as bonds, to become more attractive to investors.
GOLD PURCHASES OF CENTRAL BANKS WILL BE MONITORED
Amundi evaluates that despite short-term fluctuations, the factors that support the long-term outlook of gold continue.
According to the company, the need to protect against macroeconomic uncertainties and gold purchases by central banks may continue to support demand for the precious metal.
In this context, investors are expected to closely monitor the third quarter central bank gold purchase data to be announced by the World Gold Council.
Inflation data from the USA is also important in terms of expectations regarding the Fed's 2027 monetary policy.
PATIENCE MESSAGE TO LONG-TERM INVESTORS
Stating that the interest rate increase in December was largely priced in, Portelli said that gold investors should be patient in the face of short-term price movements.
Portelli also stated that current price levels may create an opportunity to enter gold for long-term investors.
