Gold to surge above $2,000 in the second half of the year – ANZ

FXStreet reports that economists at ANZ Bank expect core US CPI to remain above 3%for the moment. This is likely to push up inflation expectations and allow gold prices to rally.

“With the US economy firing on all cylinders and ongoing supply bottlenecks, substantial fiscal stimulus and a rapid vaccine rollout, we expect core US CPI to remain above 3% for the rest of the year.”

“Our central case for the USD is that there is further weakness ahead. We are relatively convinced that growth will continue to improve and ultimately broaden out beyond the US. This will be enough to generate modest weakness in the USD.”

“Using our forecasts for inflation, bond yields and the USD, our gold valuation model suggests prices could push back above $2,000/oz in H2 2021. Nevertheless, gains beyond that will be increasingly hard to achieve as the world economy recovers from the pandemic. Should inflation prove persistent and inconsistent with the Fed’s 2% mandate, members say the Fed won’t hesitate to act. Any subsequent rise in interest rates or reduced bond purchases would likely weigh on investor demand.”