Foreign media: Following the release of a stronger Eagle signal at the June meeting of the Federal Reserve, multiple Wall Street investment houses synchronized the downswing of gold expectations. It is generally accepted that changes in interest rate paths are overwhelming geo-risks and that short-term pricing of gold reverts to a framework dominated by real interest rates.
The target price for the investment bank is fixed.
Goldman Sachs revised the end-of-year target from $5,400 to $4900. The Bank of the United States abandoned its previous projection of $600,000. Morgan Stanley also believes that the difficulty of achieving the target price of $5,200 has significantly increased.
Deutsche Bank gave a more pessimistic scenario. According to the bank, the price of the gold could fall to $3800 per ounce if the Federal Reserve increases interest rates three to four times. The Bank also warned that the return on United States debt would continue to press down gold prices.
The Federal Reserve expects a clear shift.
After the FOMC meeting in June, the market warmed up its interest rate hikes during the year. The Fed maintained the interest rate, but the dot-line map showed that 9 officials were expected to increase the rate at least once in the year. The resolution also increased the PCE inflation projection to 3.6 per cent.
U.S. bank economists expect the Fed to increase interest rates three times this year, cumulatively to 75 basis points. According to CME Fedwatch Tool, traders have also started to increase interest rates at least once in the pricing year.
ETF financial constraints
According to many agencies, the cost of gold holding is rising. With the high return on US debt, gold ETF may face more obvious financial outflows.
Deutsche Bank noted that, since mid-May, there had been a marked increase in the correlation between gold prices and the expected increase in interest rates, while the correlation with energy prices had decreased.