Markets are waiting for news on the US debt ceiling negotiations. In this tense environment, gold prices fell below $2,000.
Gold prices await a new catalyst
The precious metals market also awaits a new catalyst on the sidelines. On Tuesday, China’s economic slowdown weakened demand expectations for precious metals. Moreover, weakening crude oil and rising US dollar index put downward pressure on gold. Edward Moya, senior market analyst at OANDA, comments:
Gold falls as Wall Street waits for a meaningful update on debt ceiling talks. There is too much risk on the table for investors to attack. Risk aversion may draw support from regional banking fears, debt ceiling drama and weakening consumer. But this will likely come from a new catalyst.
Investors turn to gold for protection
According to Bloomerg’s latest Markets Live Pulse survey, there are clear signs that investors are turning to gold as a hedge against possible default. More than half of those surveyed chose the precious metal as a hedge against debt ceiling turmoil. Gold has been the best option for investors. All other options, including US Treasuries, lagged far behind. A recent Gallup poll also found that American approval of gold as the best long-term investment has nearly doubled from last year.
The view that gold is the best long-term investment jumped from 15% to 26% in 2022, reaching the highest level since 2012. Gold overtook stocks as the second most preferred investment. It also came close to number one, with more than a quarter of Americans viewing gold as the best long-term investment. Gallup highlights the following:
Gold tends to gain when confidence levels drop in both real estate and stocks. This is typically the case during times of economic recession or uncertainty, such as during the Great Recession, and is repeated today.
What’s next for gold prices?
A major new driver for gold this year is ETF demand, which has finally realized the value of the precious metal amid renewed recession fears, the Australia and New Zealand Banking Group (ANZ) said in its latest note. In this context, strategists make the following statement:
We expect gold ETF flows to turn positive for the remainder of this year. Problems in the US banking sector, high interest rates and uncertainty about the debt ceiling weaken the economic outlook. It also increases the safe-haven demand for gold.
ANZ expects gold to hit $2,100 by the end of this year. The bank predicts that in the second half of next year, the yellow metal will be at $2,200. According to the bank, decreases in prices will be considered as buying opportunities.
Gold will maintain its reputation as a safe haven
cryptocoin.com As you follow, gold fell below $ 2,000. However, many analysts hope that gold will recover due to the debt ceiling problem. Therefore, he predicts that gold will maintain levels above $2,000. On this subject, Commerzbank analyst Thu Lan Nguyen says:
Given the ongoing dispute over the US debt ceiling, the gold price will likely hold above $2,000 for now. It will also maintain its reputation as a safe haven. After all, there is no doubt that any debt default by Washington will have serious adverse effects on the US economy, albeit temporary. This will increase the possibility of loosening monetary policy. Therefore, it will make gold relatively more attractive as a non-interest bearing investment.
Gold position is incompatible with the peak of the cycle!
Gold prices are experiencing an impressive pullback. However, TD Securities strategists say timing sales in precious metals are running out. From this point of view, strategists make the following comment:
Without an additional macro-catalyst, our analysis of positioning highlights that, apart from the debt ceiling disaster, extinction of sales in precious metals may be imminent. Gold prices are near all-time highs. But the positioning pattern remains inconsistent with a cycle peak.
