Key drivers for gold in the form of weaker USD, well contained real interest rates and the Fed funds rate have been supportive for much of this year, but the gold-supportive USD has been offset by the fear that real yields and the Fed funds rates will increase significantly, explains Bart Melek, Head of Commodity Strategy at TDS.
Key Quotes
“As such, the metal is vulnerable to selloffs, as we have witnessed last Friday when it tumbled on massive volume as some $4.2 billion worth was sold — over 30k contracts or around 10% of a normal days' activity.”
“The good news for gold is that an increasing amount of market players are advocating the investment in the yellow metal as a hedge against both market and geopolitical instability. Renewed threats from North Korea's Kim and a confrontational US President are seen as playing a nuclear game of chicken with each other. This, along with an equity market that is priced for perfection are prompting some to seek the safety of gold. On the fiscal side, the likelihood that the US will not be able to pass its oft-cited and promised Tax cut plan in a prompt manner is also helping gold.”
“The lack of fiscal stimulus both threatens equity valuations and increases the likelihood the US central bank will be more dovish that advertised, reducing the cost of holding precious metals. Indeed, as of the end of September, Bridgewater Associates, the world’s largest hedge fund, had increased its holdings in SPDR Gold Shares almost seven-fold, and more than tripled its stake on iShares Gold Trust, a regulatory filing showed. The fund recommended investors consider placing 5 percent to 10 percent of their assets in gold, citing political and economic risks.”
“The combination of a lackluster USD, geopolitics, equity markets that are priced to perfection and low real rates suggest we could see gold attempting to get back to $1,306/oz before the year is out. While much will depend on equities and how the Trump administration is progressing on the tax reform file, the yellow metal could well test the mid-$1,300s if uncertainty grows.”
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers. The author will not be held responsible for information that is found at the end of links posted on this page.
If not otherwise explicitly mentioned in the body of the article, at the time of writing, the author has no position in any stock mentioned in this article and no business relationship with any company mentioned. The author has not received compensation for writing this article, other than from FXStreet.
FXStreet and the author do not provide personalized recommendations. The author makes no representations as to the accuracy, completeness, or suitability of this information. FXStreet and the author will not be liable for any errors, omissions or any losses, injuries or damages arising from this information and its display or use. Errors and omissions excepted.
The author and FXStreet are not registered investment advisors and nothing in this article is intended to be investment advice.
Recommended content
Editors’ Picks
AUD/USD holds below 0.6800 as markets digest Powell’s Jackson Hole speech
The AUD/USD pair trades on a weaker note around 0.6790 during the early Asian session on Monday. However, the US Dollar is likely to remain under pressure after US Federal Reserve Chairman Jerome Powell’s dovish Jackson Hole speech. The US Durable Goods Orders for July are due later on Monday.
EUR/USD: Further advances appear in the pipeline
Another solid weekly performance saw EUR/USD clinch its fourth consecutive week of gains, including a new 2024 peak in the 1.1180–1.1185 band. The strong move higher in the pair came in response to the heightened downward bias hitting the US Dollar.
Gold extends upside above $2,500 as Fed hints at September rate cut
Gold price holds positive near $2,515 an ounce during the early Asian session on Monday amid the weaker US Dollar and dovish comments from the Federal Reserve. The uptick of the yellow metal is bolstered by the speech by Fed Chair Jerome Powell, signalling that time has come for interest rate cuts starting this September.
SUI, OP, ZETA lead $160 million crypto token unlocks this week
The crypto market will witness another round of heavy token unlocks this week, with $164.2 million of cliff unlocks entering into the circulating supply of several top altcoins, per crypto intelligence firm Token Unlocks.
Week ahead: PCE inflation eyed as Fed lays groundwork for September cut
Focus to stay on the Fed as PCE inflation to be week’s main highlight. Eurozone inflation data to be crucial for ECB rate cut hopes. Australian and Tokyo CPI, plus Canadian GDP also on the agenda.
Moneta Markets review 2024: All you need to know
VERIFIED In this review, the FXStreet team provides an independent and thorough analysis based on direct testing and real experiences with Moneta Markets – an excellent broker for novice to intermediate forex traders who want to broaden their knowledge base.