The gold price is still below $1900 per ounce, and the market continues to struggle. As the Federal Reserve continues to raise interest rates to reduce inflation, an international bank expects gold prices to decline in the first half of this year.

Precious metals analyst Bernard Dahdahdah stated in his latest outlook that despite a correction in gold prices this month, there is still room for further decline in gold prices as bond yields remain high and inflationary pressures continue to decline.

However, Dahdah added that based on the bank's economic model, he is not as pessimistic as he should be. He said, "The model shows that the average price of gold in 2023 may reach $1586 per ounce. Nevertheless, we will not pay too much attention to this number, considering that in the real world, there are more than a few parameters

Dahdah stated that although gold prices may fall significantly this year, investors' concerns about economic recession and unstable expectations of possible interest rate cuts in the second half of the year should prevent gold prices from falling to multi-year lows.

Therefore, in our basic forecast, we expect the average price to be $1790 per ounce in 2023, and as the Federal Reserve begins to cut interest rates, the average price in 2024 will rise to $1830 per ounce

His remarks come at a time when gold prices are struggling to attract new investor interest after a strong start to the year.

Dahdah also stated that economists believe that even if the United States enters a recession in the second and third quarters of this year, the US economy will continue to grow moderately in 2023. However, he added that the economic recession will not be severe enough to force the Federal Reserve to cut interest rates. He said, "Our model did not capture market expectations for a possible rate cut by the Federal Reserve. As we enter the second half of this year, we believe that investors' expectations for a rate cut in 2024 will increase, which should support gold

At the beginning of this year, the market began to expect interest rate cuts before the end of the year. However, sustained high inflation is helping to change market expectations. The Federal Reserve observation tool of Chishang Exchange shows that the market expects an increasing likelihood of the federal funds rate breaking 5%, reaching a peak of around 5.50% by the end of the year.

According to data released by the US Department of Labor on Tuesday, even though inflation is still far above the Federal Reserve's target of 2%, it has dropped for the seventh consecutive month this year. The US CPI rose 6.4% year-on-year in January, slightly lower than the 6.5% year-on-year increase in December last year. However, the inflation rate has fallen from a 40 year high of 9.1% in June last year.

Dahdah said that in addition to gold, he also believes that silver prices may fall because these two metals are still highly correlated.

In another research report, he said, "As of now, the three-month rolling correlation trend between gold and silver is+0.83, indicating a very strong relationship between the two metals. Over the past 20 years, this correlation has averaged+0.81, only briefly below+0.7 in 2011 and 2015." He added, "We believe that the prices of these two metals may fall back in the coming months