Last week, the price of gold fell to the level of $1,788 per ounce. Quotes fell below the key support of $1,800 per troy ounce, as the strengthening of the US dollar and the growth of government bond yields put pressure on the precious metal. The value of the asset also fell on expectations that the slow recovery of the US economy will allow the Fed to put up with high inflation in the short term. The reduction of incentives from the US Central Bank in December looks likely, the curve will become even steeper, and this should be a negative factor for gold in the short term.
The precious metal may fall to the level of $1,755 per ounce, and if this level is easily broken, the next downward movement may set a price target near the support of 1,700. As long as the market ignores price pressure in the next few months, disinflationary forces around the world will put an abrupt end to the upward movement of government bond yields, which will ensure that large volumes of gold purchases for investment purposes will continue. The Fed plans to reduce purchases of securities, so the gold market is already putting this action into current prices. Gold is considered worldwide as a means of protection against inflation and currency devaluation caused by large-scale economic stimulation by Central Banks.
The gold price is expected to move sideways in the coming months, Fitch Solutions said. Analysts also noted that the precious metal may face difficulties in 2022, when inflationary pressure begins to weaken. The agency maintains its forecast for the price of gold in 2021 at the level of $1,780 per ounce. By 2022, the value of the precious metal should fall to $1,700 per ounce. The main obstacles for gold in 2022 and beyond will be the weakening of inflationary pressure and the normalization of monetary policy, as well as a slowdown in the pace of asset repurchases by Central Banks. Fitch Solutions expects some volatility in the coming months, but is mostly neutral about the gold price in the short term. Rising bond yields and changes in monetary policy may also prove to be significant obstacles to the growth of the precious metal.
Compared to the same period last year, gold imports to India in August of this year almost doubled. This was due to high demand and the fact that low prices allowed jewelry manufacturers to increase purchases for the festive season. In August, India imported almost 121 tons of gold, compared with 63 tons for the same period last year in 2020. At the same time, the cost of imports increased to 6.7 billion in August 2021. Gold imports to India in the first eight months of the current 2021 year tripled to 687 tons, compared to 2020. The price adjustment in the first half of the month provided an ideal opportunity for jewelry manufacturers to replenish their stocks for the upcoming holiday season. Imports in September may grow to more than 80 tons of gold compared to 12 tons for the same period last year, if prices remain stable on the eve of the holiday season.
In the forecast for the next week, the gold price is expected to recover to the levels of 1790, 1795, 1800, 1810 and 1825 dollars per ounce.