The run higher in gold has been fuelled by the fall in real yields and the USD. These falls came after the last Fed meeting which saw the Fed move to a ‘meeting by meeting basis’ as the Fed recognised that the US was showing signs of slowing growth.

However, since that last Fed meeting, the data from the US has been mixed. A strong US jobs print, decent services ISM data, and signs of core inflation slowing (5.9%), and PPI falling (9.8% y/y down from 11.3% prior) have all meant that the outlook is uncertain for the path of US monetary policy moving forward.

Can the Fed afford to be more aggressive in tackling inflation? If they can then the USD could see further gains and that can pressure gold lower again. However, should US data start showing signs of slowing growth then the USD and real yields can fall again and this is very likely to lift gold. So, this is why gold’s seasonal pattern around this time of the year is so noteworthy.

Major trade risks: If the US economy remains resilient then the USD could keep gaining and that is a natural headwind for gold.


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