German lender Deutsche Bank (NYSE:$DB) has lowered its forecast for gold's price by 22% as markets grow concerned about higher interest rates in this year's second half.
Analysts at Deutsche Bank now see gold's price at $4,300 U.S. an ounce in this year's third quarter, down by more than a fifth from its previous outlook.
The revised target still implies that gold's price will rise from its current level of $4,130 U.S. an ounce. However, Deutsche Bank says it is much less bullish on gold than before.
The European bank says investors are growing increasingly worried about U.S. monetary policy and that demand for the precious metal is drying up, both of which are pressuring bullion's price.
Deutsche Bank isn't alone in growing more pessimistic on gold.
Last week, Wall Street investment bank Goldman Sachs (NYSE:$GS) lowered its gold forecast by $500 U.S. an ounce to $4,900 U.S. by year's end.
Goldman Sachs said in a note to clients that it no longer expects any interest rate cuts in the U.S. this year.
Gold's price has fallen 11% in the current second quarter. Recent signals from the U.S. Federal Reserve that interest rates are likely to move higher has accelerated the drop.
Inflation in the U.S. is currently running at an annualized rate of 4.2%, more than double the central bank's 2% target.
Higher interest rates are bad for non-yielding assets such as gold and other metals. At the same time, a rising U.S. dollar is competing against gold as a store of value for investors.
Deutsche Bank says it all adds up to an increasingly negative scenario for the yellow-coloured metal.
DB stock has decreased 9% this year and currently trades at $36.09 U.S. per share.
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