Gold is approaching its document highs, rising 50% from its 2022 lows and 25% since mid-February.
In response to Morgan Stanley commodity strategists, this surge is pushed primarily by the bodily market, with central financial institution purchases doubling in 2022/23 in comparison with earlier tendencies. Retail shopping for has additionally elevated this yr, particularly in China, the place bar and coin demand may be very robust.
Furthermore, gold exchange-traded funds (ETFs) have skilled continued inflows since late Might, primarily from Europe following the June charge minimize. Strategists imagine the US ETFs are prone to comply with swimsuit as charge cuts take impact, additional supporting gold costs.
“Whereas US recession fears are rising, our economists nonetheless see a delicate touchdown with a stronger Fed response if the info turns weaker, both of which ought to help investor gold inflows,” strategists led by Amy Gower stated in a word.
“COMEX internet longs are on the highest since Q2 2022, however nonetheless 100k tons off all-time highs,” they added.
Whereas the latest rally has been pushed by bodily elements, strategists argue that monetary flows will drive the subsequent leg increased. They word this shift is “beginning to come via,” predicting that gold costs may attain $2,650/oz by This autumn 2024.
They stated volatility is anticipated to proceed as new US information impacts predictions in regards to the timing of charge cuts, nevertheless, the general pattern for gold is anticipated to maneuver increased.
China’s central financial institution halted its gold purchases in Might after 18 consecutive months, and India’s jewellery demand has reportedly softened.
In June, gold withdrawals from the Shanghai Gold Change had been down 31% year-over-year, as weak jewellery demand offset robust bar and coin consumption.
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