Wisdom Tree has revised its gold forecasts but still thinks all-time highs are on the cards

NEW YORK (June 10)  Wisdom Tree's Head of Commodities and Macroeconomic Research, Nitesh Shah has analyzed the Fed's latest movements and the general macro picture and posted a downward revision for the yellow metal in his latest research note.

He said "With the Federal Reserve maintaining a hawkish tone, bond yields have risen, and the US Dollar remains strong. As a result, we have edged down our gold forecasts, but the risk of central banks overdoing it could send gold soaring, especially if inflation remains high while economic growth is hurt. In a base case of inflation moderating without a recession, silver should largely keep up with gold. However, an industrial downturn could hurt silver disproportionately."

Getting into specifics, the report noted, that the firm's model indicates that by Q1 2023, gold prices will still rise, but not as much as previously expected (circa $2300/oz) when the bond and US Dollar headwinds were lower.

On a positive note, Shah noted "We have observed that gold is holding up well relative to bond markets, breaking down the traditionally strong relationship between gold and Treasury Inflation-Protected Securities. Gold is an asset that generally performs well in adverse economic and financial conditions. With fears of a recession rising, investors are increasingly turning to gold as a hedge."

When it comes to silver Wisdom Tree said "Using our revised base case gold forecast, our silver model indicates that silver prices are likely to rise to $25.89/oz (from $21.93/oz) by Q1 2023. Mining capital expenditure has been rising in recent years and that could drive silver out of a supply deficit in the coming year. We assume that manufacturing activity (proxied by manufacturing Purchasing Manager Indices) will continue to moderate but won’t fall below 50 (that is, won’t contract in outright terms).

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