Commodities Buzz: Gold Investors Now See Interest Rate Increases As Less Of A Threat Says WGC

7 Oct 2022 , 11:49 AM

The World Gold Council or the WGC has stated in a latest update that the US dollar will be a key driver of gold prices over the next few months and sees risks to dollar strength primarily from valuation, positioning and further central bank intervention – which would be gold supportive. In addition, it appears that gold investors now view policy rate rises as less of a threat to gold than before. They appear to have accepted Fed hawkishness and its terminal rate forecast. In addition, their sensitivity to Federal Market Open Committee (FOMC) announcements has fallen and the growing yield curve inversion and forward rate expectations signal a consensus expectation for lower rates ahead. Gold fell for the sixth consecutive month, dropping 2.6% to finish September at US$1,671.8/oz. It was a challenging month for most assets, with global equities down 9.5%, global bonds down 5.1% and commodities down 8.4%. While a relative outperformer and thus a good diversifier, gold wasn’t the crisis hedge it has often been historically, certainly when measured in US dollars. However, for non-US investors, gold performance remains strong y-t-d. Adding to pressure on the US dollar gold price, gold futures fell to their shortest net position in four years. In addition, gold ETF outflows continued, with holdings falling 95 tonnes over the month. Price resistance under these pressures was, however, quite impressive: gold hit a monthly intra-day low of US$1,615/oz but recovered to end the month above US$1,670/oz.Powered by Commodity Insights