Gold is losing its glitter. Aggressive monetary tightening and a stronger US dollar are keeping the backdrop challenging for the gold market. Strategists at ANZ Bank expect XAU/USD to tank toward $1,600 by the end of the year.

The backdrop for gold remains challenging

“Persistently high inflation is likely to keep the US Federal Reserve on an aggressive monetary tightening cycle for an extended period. This should keep real rates positive across the curve; a key drag for gold.”

“The USD’s relationship with gold has strengthened recently. This is likely to put pressure on gold, as further rate hikes should seethe USD continue to strengthen. The wildcard is central banks defending their currencies by selling US Treasury bonds. That would be an upside risk to our view.”

“Rising geopolitical and economic risks are having limited impact haven buying. Instead, investors continue to seek protection in the USD.”

“We see the gold price falling to $1,600 by end of this year.”