The gold market is currently maintaining a pattern of wide-ranging sideways consolidation, with persistently weak momentum. Influenced by market sentiment around rising short-term inflation, risk aversion has shifted, fostering expectations for tighter, hawkish interest rate policies that continue to suppress gold's upside potential. Despite the recent weak trend, a prominent international investment firm remains optimistic, clearly favoring gold's future performance and forecasting that spot gold prices could stabilize above $5,000 per ounce within the year, with ample room for medium to long-term appreciation.
The core view from the institution is that the inflationary impact of energy shocks is temporary. Lorenzo Portelli, Head of Cross-Asset Strategy at Amundi Investment Institute, stated in a recently published precious metals research report that ongoing tensions concerning Iran are causing volatility in energy markets. However, the resulting energy supply shock is likely to only have a temporary effect on global inflation levels and is unlikely to create sustained long-term inflationary pressure.
Portelli indicated that, based on market fundamentals over the next twelve months, the team is bullish on gold's investment value in the long term. They anticipate that gold prices possess upward momentum and could gradually approach $5,500 per ounce in the future.
Divergent inflation data is alleviating pressure on central banks to tighten policy. Turbulence in the Middle East has driven a significant rise in energy prices, directly pushing overall inflation higher. The annual inflation rate has climbed to 3.3%, its highest level in nearly two years. In contrast, core price data, which excludes the more volatile energy category, has shown a relatively moderate trend, with the core consumer price increase holding steady at 2.6% over the past twelve months.
Portelli added that although the core inflation figure remains above the Federal Reserve's 2% policy target, the pace of increase has slowed and is not showing signs of acceleration. The stable and manageable trajectory of core inflation significantly reduces the necessity for central banks to implement additional tightening measures. The inflationary boost from energy shocks is most probably a short-term, temporary phenomenon.
Multiple underlying factors provide solid long-term support for gold. Investment demand for gold is not solely dictated by US dollar interest rates. The recent approximately 15% decline in gold prices from their yearly highs has already allowed the market to fully digest various negative factors. Global central banks continue to increase their gold allocations, with emerging market central banks persistently optimizing their foreign exchange reserve structures to reduce reliance on traditional currencies. The demand for gold as a strategic reserve asset remains robust over the long term. Simultaneously, as global sovereign debt levels continue to expand and liquidity risks in private credit markets become more apparent, capital is expected to keep flowing into hard assets like gold. While short-term geopolitical conflicts may lead some central banks to flexibly adjust gold reserves to stabilize exchange rates, this is considered a temporary regulatory measure and does not alter gold's strategic importance.
In summary, although gold faces increased volatility in the short term due to interest rate expectations and geopolitical situations, its fundamental support is strong. Portelli emphasized that gold is a high-quality safe-haven and store-of-value asset. While it cannot hedge against all market fluctuations, it effectively protects against systemic risks, currency depreciation, and shocks from global policy changes, maintaining its prominent long-term allocation value.
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