HSBC Mark Forecasts Higher, Still Bearish Vs. Current Levels

Earlier today HSBC noted that the late ‘23 gold rally was “fuelled by expectations of robust Fed rate cuts in 2024 (~150bp). These expectations are well above what the Fed dots imply, as well as HSBC’s forecast of 75bp of cuts.”

• “Should the scale of these anticipated cuts not fully materialise, gold may backtrack. Gold is historically sensitive to real rates, and while there has been a significant disconnect in this relationship, we expect real rates to weigh on gold as 2024 unfolds.”
• “ETFs continue to liquidate but OTC and real money purchases have been strong.”
• “Net long positions on the CME are high but may not rise much further.”
• They suggest that market sentiment is “bullish” but believe that prices are “overstretched.”
• Still, they raised “average price forecasts but are bearish from current levels.” Their new forecasts for 2024 and 2025 are $1,947/oz (prev. $1,850/oz) and $1,835/oz (from $1,725/oz), respectively. They also look for a “wide trading range” of $1,825/oz-$2,200/oz for 2024.