After last year's rally, the gold market recorded its worst quarter in more than four years in the first quarter, with significant differences, and recently continued to wobble above $1700 an ounce with strong upward resistance.
(RBC Capital Markets) Christopher Louney, the Royal Bank of Canada capital market, said that the main factors that pushed gold higher last year have now become a hindrance to it last week.
Affected by the epidemic last year, the whole market fluctuated violently, risk aversion was high, and gold rose to a new all-time high.
But at the beginning of this year, the situation is different, and market expectations for recovery are rising.
However, Louney pointed out that gold prices fell back earlier than expected.
"I didn't think there would be a significant decline until later this year."
Behind this is mainly the change in expectations of global economic growth, with the rising dollar, higher Treasury yields and higher market risk sentiment, all of which have weighed on gold's performance.
"expectations of global growth are bad for gold itself, even if there is some increase in consumption and physical demand for gold, but it is not enough to change the performance of gold prices in the short and medium term."
Louney said gold prices are likely to fall slightly for the rest of the year.
"even with inflation concerns, the overall gold market is still neutral and bearish."
At a time when expectations of a global economic recovery are rising and stock markets continue to rise, it may be difficult to repeat the massive increase in gold ETF holdings last year.
Louney expects gold prices to average around $1726 an ounce in the second quarter and fall to $1694 an ounce in the fourth quarter.
However, Louney said that if there is really runaway inflation, then gold prices are expected to return to close to $2000 / oz.
"this requires unexpectedly large inflation that is completely out of control, which will push gold prices sharply higher. But the possibility of such a situation is very small. "
