Investors Express Confidence in Gold Amid Approaching End of Fed Cycle
Gold’s allure is not fading, according to a dozen money managers who told Bloomberg News they plan to keep or increase their exposure to the precious metal in the coming year.
Bullion has struggled in recent weeks, owing to various headwinds ranging from rising real yields to a stronger US dollar and the prospect of US interest rates remaining higher for an extended period.
The survey of investors, which included sovereign wealth managers and hedge funds, expressed cautious optimism about price prospects through 2024.
None of the respondents said they planned to reduce their gold exposure in the next 12 months, and five said they planned to increase their allocations. More than two-thirds expect prices to rise, with five expecting an all-time high. The survey was conducted between August 10 and August 22.
There is still a lot of uncertainty about when the Fed will end its tightening cycle, which would be a big plus for non-interest-bearing gold. Global central banks are still grappling with persistent inflation, and the US labor market has been surprisingly resilient in the face of aggressive monetary tightening.
While there are some signs that investors are bracing for higher rates to last longer, the swaps market is still pricing in no more rate hikes and a shift to policy easing next year.
“We do anticipate there’s pent-up gold demand from investors waiting for the Fed to finish,” said Darwei Kung, head of commodities and portfolio manager at DWS Group. “That’s a positive set-up from our perspective.” He sees gold reaching a record $2,250 an ounce in the period.
Mixed Outlook: Balancing Geopolitical Factors and Macroeconomic Realities
Bullion is trading around $1,900 per ounce, down about 8% from its peak this year. Amid the economic turmoil caused by the COVID-19 pandemic, it peaked at approximately $2,075 in August 2020.
Economists are becoming more confident that the US economy will experience a soft landing, a significant shift from widely held beliefs earlier this year that the economy would experience a sharp downturn.
A separate survey revealed that people expect gold prices to rise. According to the median of 602 responses to Bloomberg’s Markets Live Pulse online survey of global readers conducted from August 14 to 18, gold will trade at $2,021 per ounce in 12 months.
The continued demand for gold indicates lingering concerns about geopolitical tensions and macroeconomic uncertainties, such as simmering tensions between the US and China, the war in Ukraine, or what will happen next with China’s property crisis.
Continued purchases by global central banks and relatively strong retail demand in emerging markets are also positive factors for gold.
Still, in the near term, gold watchers have plenty of reasons to be gloomy about the precious metal’s prospects. Investors will pay close attention to the Jackson Hole gathering of central bankers this week for the next indications of interest rate movements.
Fed Chair Jerome Powell will speak on Friday.
Read Next: US Imposes Visa Restrictions On Chinese Officials Amidst Concerns Over Tibetan Assimilation
Source: Yahoo! Finance, Bloomberg
