In the short term, headline inflation continues to cool, but core inflation remains stubbornly high, and the Fed is near its cyclical peak. As the imminence of a US recession recedes, these developments give the Fed the opportunity and the obligation to keep rates higher for longer to fight inflation. This will keep real rates elevated, which combined with the currently strong Dollar creates headwinds capping Gold prices below or at $2,000 to the end of this year on our estimates.

In 2024, the need to keep rates high will likely subside. In line with our outlook for energy and specifically for crude, the easy wins in bringing inflation to heel are likely in the rearview mirror. The soft cap on Fed funds, together with sticky inflation, is the crucial ingredient in our positive outlook for Gold next year. We forecast a depreciating Dollar into 2024 which should provide further tailwinds for commodities and in particular Gold.