(Kitco News) - Even after briefly falling below $1900 an ounce amid surging Treasury yields and a six-month high in the US Dollar Index, gold has remained resilient, which bodes well for the precious metal’s price trajectory as demand improves, according to analysts at ANZ Research.
“USD strength is likely to wane in 2024,” they wrote in a recent report. “While we think appreciation in the USD will sustain to year-end, firmer expectations of rate cuts and slowing economic growth momentum will see the USD resuming its downward trajectory next year. This will be a tailwind for gold.”
ANZ pointed out that so far in 2023, “investors have liquidated 130t of strategic investments ,” with Europe and North America leading the outflows driven by their tightening monetary policies. They noted that Asia has seen inflows of 9.1t this year, including 6t in August alone. “A weakening CNY and lower consumer confidence is driving fund flows in gold,” they said. “Weaker JPY also supported ETF flows for the region.
Looking at futures and options, the ANZ analysts said that net-long positions are at six-month lows, but this could actually be a positive for prices going forward. “A lean speculative position leaves limited room for a material sell-off,” they noted. Demand for physical gold is expected to improve as well in the fourth quarter of the year, “while weak currency and a fall in consumer confidence in China should boost retail investment,” they said. “China’s gold spot premium rose to a high of USD60/oz in August before normalising to USD37/oz. While the rise had more to do with a supply squeeze caused by the government’s import restrictions, strong physical buying should keep the premium high into the fourth quarter.
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