Gold price rallied on Thursday on support from slightly lower US Treasury yields and a pullback in the dollar. While one analyst noted that some institutions may liquidate their gold to raise funds, some analysts see some potential for the yellow metal. We have compiled the evaluations and price predictions of master analysts who interpret the developments in the market for our readers.
“Corporations can liquidate gold to raise funds”
GoldSilver Central MD’s Brian Lan has been in a narrow range between $1,828 and $1,864 for about a week. says it hovers around $1,850 in total and that prices are currently consolidating. The analyst adds that this trading range may continue with the effect of some investors sitting on the sidelines due to the lack of important news. The analyst also makes the following assessment:
Investors have yet to see how gold will react to the lifting of quarantines in Shanghai; While there may be pent-up demand on the physical side, institutions with large amounts of gold may liquidate to raise funds.
Citi Research: These are putting pressure on gold price momentum
Benchmark US 10-year Treasury rates, increasing the attractiveness of zero-yield gold declined. As you can follow on Cryptokoin.com news, the dollar eased after hitting the top for more than a week in the previous session and rekindled interest in bullion among offshore buyers. In a note on market developments, Citi Research highlights the following:
A hawkish Fed, higher real interest rates, and what still clings to medium-term inflation expectations are putting pressure on gold price momentum against a relatively strong dollar backdrop.
“These strengthen $1,800 support for gold price”
Bullion is considered a safe haven in times of political and economic uncertainty. However, higher short-term US interest rates increase the opportunity cost of holding non-interest-bearing gold. Citi Research also points out in the note:
It also seems likely that some geopolitical risk premiums have eroded as the market absorbs the Russia/Ukraine conflict. On the other hand, high asset market volatility, potential return on central bank gold offering and ‘stagflation’ tail guards are likely to reinforce the $1,800 support.
Société Générale: Some potential in yellow metal
Although rising real interest rates will continue to create a challenging environment for the gold market Meanwhile, analysts at Société Générale see some potential for the yellow metal as a major diversifier for central banks. The French bank is looking specifically at non-OECD central banks as some countries try to move away from the US dollar.
The role of the US dollar as the world’s reserve currency has been in focus since the Russian invasion of Ukraine. In response to the conflict, the United States and its Western allies imposed significant economic sanctions on Russia, effectively using the US dollar as a weapon.
“Non-OECD countries are increasing their gold holdings”
Analysts say central banks in developed western countries already have significant gold reserves. says. For example, they note that Banco de Portugal’s gold holding represents more than 72% of its foreign reserves. By contrast, SocGen states that emerging market central banks hold, on average, about 3% of their reserve assets in gold.
Russia’s freezing of some central bank reserve assets highlights the risks inherent in some USD-based holdings, including Treasuries, in a context where most central banks have expressed a desire to ‘dollarize’ asset allocations . From low starting points, non-OECD countries have increased their gold holdings but continue to be significantly underinvested compared to OECD countries.
SocGen recommends allocating 5% to gold in its latest multi-asset portfolio strategy. Analysts argue that if this logic proves correct, and non-OECD central banks increase their gold holdings, say 5% (in theory, they could go much higher given their current very low weight compared to OECD central banks) that would be below 475 tonnes, or 13% of 2021 gold production. It states that it will be equivalent to .
“This is why we don’t go up for the year-end gold price”
SocGen says the Federal Reserve’s aggressive rate hikes will keep real interest rates down. appears to be relatively neutral on gold in the short term, as they pointed out that the But it also highlights rising inflation as a positive factor for the precious metal. Analysts explain these views as follows:
Although there are occasional spikes as geopolitical tensions arise, we do not basically go up in year-end gold prices, as real interest rates need to be supported by the Fed’s tightening. However, real yields (USD yield minus CPI) can remain negative until the US enters the next recession, lowering the opportunity cost of gold for investors with a longer time horizon.
