Benefits from Halt in USD Gains

• For three trading sessions in a row, the XAU/USD gold price moved upwards, with gains that reached the $1922 resistance level, its highest in two weeks.
• It rebounded from recent strong losses that affected the $1885 support level.
• Gold’s gains came in the first place, amid the halting of the US dollar’s gains, in the middle of the anticipation of financial markets and investors’ statements US Federal Reserve Governor Jerome Powell will make tomorrow during the Jackson Hole Symposium.

Investors say they will hold on to gold as the Fed nears the end of its tightening cycle. Gold is not losing its appeal, according to dozens of money managers who all told Bloomberg News they expect to maintain or increase their exposure to the precious metal in the next 12 months. All in all, gold has stumbled in recent weeks in the face of multiple headwinds from rising real yields to a stronger US dollar and the prospect of US interest rates remaining high for longer. The survey of investors – from sovereign wealth managers to hedge funds – showed some modest optimism about the price outlook through 2024.

None of the respondents said they would reduce their exposure to gold in the next 12 months, and five said they expected to increase their provisions. More than two-thirds of them see prices going up, and five of them expect a clear rise at all. The poll was conducted from August 10 to 22.

There is still significant uncertainty around when the Fed will end its tightening cycle, which would be a significant positive for non-interest gold. Global central banks continue to grapple with stubborn 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 preparing for interest rates to remain high for longer, swaps markets still anticipate not raising interest rates and shifting to policy easing next year.

Commenting on the future of gold. “We expect there will be pent-up demand for gold from investors who are waiting for the Fed to come to an end,” said Darui Kong, head of commodities and portfolio manager at DWS Group. “This is a positive setup from our point of view.” He sees the price of gold reaching a record high of $2,250 an ounce in this time period. Bullion is currently trading near $1,900 an ounce, down about 8% from this year’s peak. It reached a record high in August 2020 at about $2,075, in the midst of the global economic turmoil caused by the COVID-19 pandemic.

Certainly, economists are becoming more confident that the US economy can slide into a soft landing, a marked shift from widely held views earlier this year that the economy will contract sharply.

A separate survey also showed expectations of higher gold prices. Gold will be trading at $2,021 an ounce 12 months from now, according to an average of 602 responses to a Bloomberg Markets Live Pulse online survey of global readers conducted Aug. 14-18. The continued appetite for gold indicates ongoing concerns about geopolitical tensions and macroeconomic uncertainties – for example, escalating tensions between the US and China, the war in Ukraine, or what’s next for China’s real estate crisis. Other positive factors for gold include continued purchases by global central banks and relatively strong retail demand in emerging markets.

At the same time, the breakdown in the relationship between stocks and bonds – a cornerstone of the popular 60/40 investment strategy – is also helping to boost the metal’s case due to its ability to diversify investment portfolios, according to the World Gold Council. However, in the near term, gold watchers have plenty of reasons to be pessimistic about the prospects for the metal. For the next clues about interest rates, investors will pay attention to comments from this week’s Jackson Hole meeting of central bankers. Fed Chairman Jerome Powell is scheduled to speak on Friday.

The movements of yesterday and today are a stage of breaking the downward trend of the XAU/USD gold price. The bulls’ control will be strengthened if they move towards the resistance levels of 1925 and 1948 dollars, respectively. With the last level, the appetite for buying gold will increase again. On the other hand, and for the same time period in the daily chart, the support level at $1885 an ounce will remain the most important to confirm the bears’ control over the trend. The price of gold may remain in its current range until the markets react to the statements of US Federal Reserve Governor Jerome Powell tomorrow.

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