ANZ Bank Strategist Says Recent Gold Price Decline Is Temporary, Gold Bulls Supported by Fed Rate Cut to 3% by Year-End

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Source: Hu Tong Finance

According to Hu Tong Finance APP, ANZ Bank strategists Soni Kumari and Daniel Hynes believe that the recent decline in gold prices may be only temporary. In their latest report, they point out that although the US dollar has rebounded due to its safe-haven status, the currency is still overvalued, and this strength may be short-lived. They emphasize that the Federal Reserve is unlikely to reverse its monetary policy stance, as the inflation trend remains intact. Despite rising oil prices increasing inflationary pressures again, they expect this to be temporary. ANZ Bank’s baseline scenario is that by the end of December 2026, the Federal Reserve’s policy rate will fall to 3.0%. They add that lower interest rates and a weaker dollar should support capital inflows into the gold market.

Further analysis shows that the recent gold price correction is mainly driven by the dollar index rebounding to around 99.5, while oil prices remain volatile at high levels, boosting short-term inflation expectations and prompting some investors to take profits. Latest futures data indicate that spot gold prices are stable around $5,180 per ounce, down about 7% from the January high of over $5,600, but trading volume has modestly increased, showing strong buying support. Soni Kumari and Daniel Hynes further state in their recent research report, “Central banks’ demand for gold may further expand this year, with no signs of structural support reversing.” This view aligns with the current trend of central banks buying gold amid geopolitical uncertainties, reinforcing gold’s position as a long-term safe-haven asset.

From a medium- to long-term perspective, the Federal Reserve’s policy path is the key driver of gold prices. Currently, the federal funds rate is maintained between 3.50% and 3.75%, with market pricing indicating ample room for rate cuts before the end of 2026. ANZ Bank’s target of 3.0% is more optimistic than market consensus, which will significantly reduce the opportunity cost of holding gold. The overvaluation of the dollar is also crucial: despite the short-term rebound of DXY, fundamentals suggest downward pressure amid global economic divergence, with a gradual decline into the low 90s by 2026. Historical data shows that during similar dollar weakness cycles, gold often gains double digits. Although oil-driven inflation temporarily pushes yields higher, the inflation reversal trend remains intact, and central banks are unlikely to tighten policies hastily. The resurgence of industrial and investment demand from major Asian economies further enhances gold’s attractiveness, and capital inflows are expected to push prices higher again.

To clearly compare gold prices with policy expectations, the following table highlights key scenarios:

The above data underscores the decisive support that Fed rate cuts and dollar movements provide for gold. Short-term corrections offer entry points, and medium-term bullish logic is reinforced, but risks such as sustained oil price surprises or hawkish Fed statements should be monitored. Overall, ANZ Bank strategists’ optimistic outlook highlights that gold still holds investment value in the current macro environment, with capital inflows expected to drive a recovery. Summary: The short-term decline in gold prices is due to temporary factors like the dollar and inflation, but ANZ Bank expects easing monetary policy and a weakening dollar to provide strong support. Market participants should pay attention to policy data to seize structural opportunities.

【Frequently Asked Questions】

Q1: Why do ANZ Bank strategists believe the recent decline in gold prices is only temporary?

A1: Soni Kumari and Daniel Hynes point out that although the safe-haven rebound has pushed the DXY to around 99.5, the currency is still overvalued, and this strength is unlikely to last. Additionally, rising oil prices and inflationary pressures are expected to be temporary, with the deflationary trend remaining intact. Gold prices are currently stable around $5,180 per ounce, down 7% from the high, but increased central bank demand and structural support have not reversed, making the correction a buying opportunity.

Q2: How does the Fed’s projected rate cut to 3.0% by the end of 2026 support gold?

A2: ANZ Bank’s baseline scenario shows that by December 2026, the policy rate will fall to 3.0%, a reduction of 0.50-0.75 percentage points from the current 3.50-3.75%. This will significantly lower the opportunity cost of holding gold and stimulate capital inflows. The report emphasizes that a lower interest rate environment benefits non-yield assets, and combined with a weaker dollar, is expected to push gold prices back above $5,800 per ounce.

Q3: How does the overvaluation logic of the dollar influence the gold price path?

A3: Although the dollar has rebounded temporarily due to safe-haven demand, ANZ Bank believes its fundamentals are clearly overvalued, and a gradual decline into the low 90s by 2026 is expected. A retreat of the DXY from 99.5 will weaken dollar dominance, and historical data shows that during dollar weakness cycles, gold tends to gain over 15%. While oil-driven inflation pressures temporarily push yields higher, they will not reverse the Fed’s easing path, and gold’s safe-haven properties will re-emerge.

Q4: What is the short-term impact of rising oil prices on inflation and gold?

A4: Although high oil prices increase the risk of inflation resurgence, strategists expect this to be temporary and not alter the overall deflationary trend. The Fed is unlikely to reverse its stance, and short-term yield increases may suppress gold prices. However, once oil price pressures ease, capital inflows are expected to accelerate the rebound. The latest report indicates that increased central bank demand will buffer against any temporary volatility.

Q5: How can investors capitalize on ANZ Bank’s gold outlook?

A5: In the short term, investors can consider buying spot gold or ETFs on dips, paying attention to the March Fed meeting and oil inventory data. For the medium term, locking in the end-of-year 3.0% rate scenario and the expected dollar decline, diversifying into physical gold and mining stocks is advisable. The report reminds that central bank gold buying remains supportive, but stop-losses should be set to manage geopolitical or policy surprises. Overall, this outlook provides a clear framework for medium- to long-term bullishness in gold, with recommendations to adjust positions based on the latest $5,180 price movements.