Analysts and traders have significantly raised their predictions for gold prices but expect high interest rates to keep a lid on rallies, a Reuters poll showed on Tuesday.
Gold tumbled from more than $2,000 an ounce to as low as $1,613.60 last year as rising interest rates pushed up bond yields and the dollar, making non-yielding, dollar-priced gold less attractive.
But prices have surged above $1,900 as expectations that rates will soon stop rising brought yields and the dollar down and as central banks bought bullion.
The strength of that rally means gold may not have too much further to go, said Suki Cooper, analyst at Standard Chartered.
"We expect the U.S. dollar to weaken and bond yields to fall, but gold appears to have priced in much of this risk early," she said, adding prices could still reach $2,050 before easing into the second half of the year.
Graphic: Gold prices vs dollar-
Some analysts remain bearish. "We forecast a decline from here as the U.S. Fed extends its rate hike cycle into 2023 and holds its peak to cap inflation," said Tom Price, analyst at Liberum.
"This policy will underpin long-dated real rates (on bonds), acting as a drag on no-yield gold's price," he said.
The poll of 38 analysts and traders returned median forecasts for gold to average $1,825 an ounce in the first quarter of this year, $1,840 in the second, $1,852.50 in the full year and $1,890 in 2024.
Three months ago, a Reuters poll predicted prices would average $1,712.50 in 2023. In 2022, gold averaged $1,801.93.
For silver, the poll forecast average prices of $23 an ounce in 2023 and $24 in 2024, sharply higher than the $20 for 2023 predicted in the last poll. Silver averaged $21.77 in 2022.
Silver should begin to outperform gold as China's economy reopens and global manufacturing activity recovers, said Bradley Saunders at Capital Economics.
"The main risk, though, is that high interest rates in developed markets take a significant toll on demand for interest-sensitive consumer goods, such as electronics, which silver is used in," he said.