If you caught our Mid-Week Bulletin on Wednesday, you’ll know that Commerzbank started the week by increasing its gold price forecast for the remainder of the year. The bank’s analyst Carsten Fritsch cited gold’s position as a safe haven asset, explaining gold was also in high demand as a hedge against runaway inflation. Commerzbank upped its price expectations for the precious metal, saying it now expected to see average prices of £1,588 ($2,000) in quarter two.
Scotiabank has now echoed that vote of confidence as the second bank this week to publicly increase its price expectations by £140 ($200) with the Canadian bank’s new average forecast for the year sitting at £1,585 ($2,000) rather than £1,445 ($1,800).
Marc Desormeaux, the bank’s senior economist said the bank is bullish on gold due to the persistent presence of inflation – something it sees lingering despite any Federal Reserve efforts to bring it under control – along with negative real interest rates.
Explaining the decision to rise predicted pricing levels, he said, “Gold investors may be betting that the Fed will avoid the most aggressive path of policy action later this year for fear of slowing economic growth too significantly; that would presumably keep inflation—against which bullion is viewed as a hedge—higher for longer.
“The upgrades reflect upward revisions to inflation forecasts since January 2022 and our expectations that negative real rates will persist for longer than previously anticipated.”
