Greg Gibbs, analyst at Amplifying Global FX Capital, suggests that gold has developed a persistent uptrend while USD performance has been mixed, which reflects underlying weakness in the USD and doubts about the state of the global economy.
Key Quotes
“Gold has continued to rise this year despite the rebound in global assets; in fact, its gains have accelerated. This seems at odds with its status as a safe-haven. However, investor sentiment towards global growth does not appear to have rebounded with equities. Many investors may view the rebound in equities as a correction from oversold levels last year rather than the start of sustained new bull-market.”
“Even though US and global equities have rebounded, US rates and yields have not. Lower US yields, and less confidence in the USD, or any other currency, may be shifting demand to gold.”
“There are reasons to see a persistent rise in gold this year. It has developed a rising trend that is bound to attract more investor interest.”
“The rise in gold may tend to weigh down on the USD and equities, feeding the narrative that it reflects underlying weakness in the USD and heightened risks for the global economy.”
“However, we also need to take a step back and acknowledge that gold was surprisingly weak between April and August last year, and its rise over recent months largely reverses this earlier decline. We should expect Gold to face a key test of its recent gains when it returns to its highs last year around 1355 to 1365.”
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