Gold: Upside risks building as fiscal worries grow – ING

ING Commodities Strategist Ewa Manthey highlights that Gold has rebounded from its July lows near $4,000/oz to around $4,600/oz, supported by renewed investment demand, a weaker Dollar and mounting concerns over the US fiscal outlook. She notes recovering ETF and central bank demand, but stresses that persistent US inflation and potential further Fed tightening remain key headwinds for Gold.

Fiscal concerns and demand support prices

"Gold has climbed from around $4,000/oz in mid-July to around $4,600/oz, returning to levels last seen in May."

"In our view, gold's resilience suggests that the rally is not simply a response to lower yields. The prospect of larger Treasury buybacks has refocused attention on government borrowing and fiscal credibility. It has also revived concerns about currency debasement, reinforcing gold's appeal as a store of value."

"A weaker dollar and lower short-term yields have helped gold rebound after prices found support around $4,000/oz in mid-July. Softer US data have also revived expectations that the Fed could begin easing policy in 2027."

"The improvement in ETF demand is another positive signal. Global gold-backed ETFs attracted $3bn in July, lifting their holdings by 23 tonnes, according to the World Gold Council."

"Central banks also remain a significant source of demand. Reported net purchases reached 51 tonnes in June, taking the first-half total to 102 tonnes, with Poland and China leading the buying. We expect official-sector buying to continue supporting the market, but further gains will increasingly depend on whether Western investors maintain their renewed interest in gold."

"Our forecast of $4,150/oz for the fourth quarter (average price) assumes that persistent inflation keeps US monetary policy restrictive and prevents a sustained fall in yields. However, renewed ETF buying, a weaker dollar and mounting fiscal concerns are creating increasingly clear upside risks to our outlook."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)