Interesting developments in the gold market as bond yields and interest rates continue to rise. This is causing the opportunity cost of holding gold to increase, as gold is an asset without interest. Additionally, a stronger dollar resulting from rising interest rates is making gold, priced in dollars, more expensive for investors holding other currencies.
Bank of America analysts have stated that a weak dollar and US Treasury yields will be a major drag on gold prices. However, WisdomTree analysts believe that without the pressure from a strong dollar and a surge in US Treasury yields, investors will buy gold as a hedge against inflation and economic volatility. This is expected to help push gold prices above $2,100 per ounce by the end of 2023.
Data from the World Gold Council shows that many analysts expect central banks in countries to continue buying more gold into their reserves, following purchases in the first nine months of 2022 that were more than any other in the past 50 years. Additionally, ANZ analysts believe that retail investor demand for gold bars and coins will remain strong due to the economic recovery in China, the world’s largest consumer market.
It’s worth noting that ANZ analysts also caution that if gold breaks from its current range of $1,870-$1,900, it could drop below $1,800, possibly as low as $1,730. It will be interesting to see how these factors play out in the gold market in the coming months and how it will impact the investors and the economy.
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Tuesday, January 17, 2023