Gold Price Forecast: XAU/USD to offset Fed rate hikes by virtue of safe-haven demand – ANZ

FXStreet Insights Team FXStreet

Gold’s geopolitical risk premium eased amid peace talks between Russia and Ukraine. A stronger USD and the prospects of a more aggressive rate hike cycle also weighed on sentiment. Strategists at ANZ expect the yellow metal to offset prospects of aggressive tightening thanks to safe-haven demand amid prolonged Ukraine conflict.

Gold investment demand is rebounding

“The US Federal Reserve raised rates by 25bps at its meeting last week. Its dot plot showed the median for the next two years is exceeding long-term projections. While an aggressive rate hike cycle remains a key headwind, this should be offset by strong safe-haven demand amid the uncertainty created by the ongoing war in Ukraine.”

“Investment demand has seen strong inflows since February, with ETF net flows rising to 202t year-to-date. This follows a net liquidation of 300t in 2021. Investors have also added net-long positions of 233t of gold in futures.”

“Physical gold demand in India and China could be impacted by higher gold prices and the prospects of slower economic growth. Deteriorating gold spot premium in India and China suggests weakening physical offtake.”

Author

FXStreet Insights Team

FXStreet

The FXStreet Insights Team is a group of journalists that handpicks selected market observations published by renowned experts. The content includes notes by commercial as well as additional insights by internal and external analysts.

Markets move fast. We move first.

Orange Juice Newsletter brings you expert driven insights - not headlines. Every day on your inbox.

Editor's Picks

EUR/USD drops to daily lows near 1.1630

EUR/USD now loses some traction and slips back to the area of daily lows around 1.1630 on the back of a mild bounce in the US Dollar. Fresh US data, including the September PCE inflation numbers and the latest read on December consumer sentiment, didn’t really move the needle, so the pair is still on course to finish the week with a respectable gain.

GBP/USD trims gains, recedes toward 1.3320

GBP/USD is struggling to keep its daily advance, coming under fresh pressure and retreating to the 1.3320 zone following a mild bullish attempt in the Greenback. Even though US consumer sentiment surprised to the upside, the US Dollar isn’t getting much love, as traders are far more interested in what the Fed will say next week.

Gold makes a U-turn, back to $4,200

Gold is now losing the grip and receding to the key $4,200 region per troy ounce following some signs of life in the Greenback and a marked bounce in US Treasury yields across the board. The positive outlook for the precious metal, however, remains underpinned by steady bets for extra easing by the Fed.