Gold Price Forecast: XAU/USD to drop on Fed's tapering and prospects of rate hikes – ANZ

Gold remains sensitive to signs of Fed tapering. Cooling inflation and softer labour data have raised the risk of a delay in tapering. But expectations around Fed tapering later this year are set to weigh on XAU/USD, economists at ANZ Bank report.

See – Gold Price Forecast: XAU/USD to mark a change of trend lower only below $1691/71 – Credit Suisse

Renewed strength in the USD to drag gold lower

“Strong economic data through September will be important for the Fed to announce tapering from November. Winding-down of asset purchases later this year and the prospect of rate hikes would be supportive for the US dollar and a headwind for gold prices.”

“Disappointment in jobs data or softer inflation could provide some upside room for the yellow metal.”

“Gold prices have decoupled with US 10y yield and TIPS. However, we don’t see this trend lasting much longer. Our gold valuation model suggests it is still significantly undervalued.”

“Expensive equity valuations and other uncertainties are raising the odds of a market correction, with S&P and the gold ratio hitting a 2008 high. This could encourage investors to hold safe-haven assets.”