Deutsche Bank Cuts Q3 Gold Forecast 22% on Rate Hike Fears

SEATTLE (Scrap Monster): Deutsche Bank has significantly lowered its near-term outlook for gold prices. This is primarily driven by various factors, including inflationary pressures, resilient U.S. economic data, and expectations of higher interest rates.

The research note released by Deutsche Bank on Tuesday cuts its third-quarter gold price forecast by 22% to $4,300 per ounce from its previous estimate. The bank expects prices to see some recovery in the fourth quarter, averaging $4,800 per ounce. Interestingly, both projections remain above the current gold price of approximately $4,150 per ounce.

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According to Deutsche Bank analyst Michael Hsueh, the recent weakness in gold prices was mainly due to the re-rating of U.S. Fed policy expectations and a stronger-than-expected U.S. macroeconomic data.

A potential three to four additional rate hikes by the U.S. Federal Reserve could see gold prices plunge to levels of around $3,800 per ounce. However, ongoing strong central bank purchases are likely to provide long-term support to gold prices, despite subdued ETF demand, it said.

Last week, Goldman Sachs revised its forecast, lowering its year-end gold target to $4,900 per ounce from $5,400.

Gold prices have declined more than 3% so far this year after surging to record highs in January.