Gold continued to extend gains after Monday’s profit-taking, pushing through $1,924 per ounce, despite renewed headwinds from the US interest rate outlook.
Tuesday saw a raft of US economic data, with retail sales, manufacturing and industrial production, and capacity utilisation for September, all coming in higher than expected. With further evidence of US economic resilience, interest rates have continued to track higher, creating headwinds for non-yielding assets, such as gold.
While the market awaits further clarity on the rate outlook from a speech by Federal Reserve Chair Powell on Thursday, gains for the US Dollar – and the dampening impact on gold prices – have been marginal as this is already considered a very ‘crowded trade’ within FX markets.
Recent gold investment flows appear somewhat mixed. Demand from central banks appears unabated, but private portfolio investment via ETFs and similar vehicles, shows net outflows in both Europe and the US, with only Asia bucking the trend. However, ETF flows have often proven volatile.
Despite the above however, gold continues to benefit from its status as a ‘safe haven asset’ amid intensifying geopolitical uncertainty. Renewed pressure on conventional alternatives in both fixed income and real estate markets has further cemented its strategic position within investment portfolios.
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