Gold prices are likely to remain buoyant for the remainder of the year as demand rides high for the safe-haven asset. The war in Ukraine, rising inflation worldwide and China's continuing battle with the Covid-19 virus are supporting the precious metal.
Spot gold was at $1,931.2 per ounce (oz) on Friday morning according to Refinitiv data. US COMEX gold futures were down 0.23% at $1,933.3.
Fitch Solutions has revised up their 2022 and 2023 gold price forecast from 1,700 per ounce (oz) and 1,650/oz to 1,900/oz and 1,800/oz, respectively.
"While we expect significant price volatility going forward especially as the conflict in Ukraine evolves, we expect gold prices to remain elevated in the coming years compared to pre-Covid levels," it said in a note on Friday.
According to the World Gold Council (WGC), gold had a good first quarter this year--its best since Q2 2020--ending 8% higher at $1,942/oz.
According to it, the commodity "was among the best performing assets amid significant weakness in both equity and bond markets." Rising inflation levels, higher interest rates and the unexpected geopolitical risk drove the metal higher, the industry body said.
The strong demand is also coming from gold ETFs, which had net inflows of 187.3 tonnes in March, with assets just below the record of US$240.3bn, set in August 2020.
"March inflows were the strongest since February 2016, despite a significant rebound inequities and a strong US dollar performance. There were positive flows across all regions during the month, but most came from North American and European gold ETFs," said WGC.
Ehsan Khoman, Director, Head of Emerging Markets Research (EMEA) at MUFG, said: "We are already seeing strong momentum in gold ETF demand, which should build further as US growth slows."
He said the outlook for gold was the most bullish in 10 years.
Another major buyer in the gold market are central banks, particularly the Bank of Russia, which is committed to buying gold at 5,000 roubles per gram, according to Alex Kuptsikevich, market analyst at FxPro Group.
"The gold pullback and the rouble rise have reduced the initial discount from 20% to 3%, which we have seen over the last six trading sessions," he said. A return to rouble depreciation would open the way for gold to fall, but until then, it is hardly prudent to bet against it, he added.
On the downside, gold contends with an easing of the Fed's monetary policy and the strengthening dollar.
"While gold prices are hovering near their all-time high of 2,075/oz and will be dictated largely by the war in the coming months, we expect US dollar strength and recovering bond yields to cap gold's rally," said Fitch.
(Reporting by Brinda Darasha; editing by Seban Scaria)