"In the medium term, the factor that has the greatest influence on gold's trajectory remains the U.S. interest rate cycle. As recent data shows signs of cooling in U.S. growth and consumption, the market increasingly believes that the Federal Reserve (Fed) will have to begin cutting interest rates in the near future. The decline in bond yields at the end of November to around 4.02% before rebounding to the current level near 4.088% created favourable conditions for gold to strengthen, as the opportunity cost of holding gold decreases."
"Gold continues to maintain its position as a key safe-haven asset thanks to a combination of structural and cyclical drivers. Although gold prices have risen sharply over the past year and repeatedly set new historical highs, this rally does not merely reflect short-term speculative sentiment but is supported by solid fundamentals such as expectations of monetary easing, rising geopolitical risks, and the growing accumulation of gold by central banks."
Gold retains its safe-haven status amid a slowing global economy, supported by structural and cyclical drivers. Strong fundamentals include expectations of monetary easing, heightened geopolitical risks, and increased central bank purchases. The U.S. interest rate cycle is the primary medium-term determinant of gold's path. Cooling U.S. growth and consumption have raised market expectations for Federal Reserve rate cuts, lowering bond yields and reducing the opportunity cost of holding gold. Historically, declining real interest rates favor gold. Continued central-bank accumulation reflects reserve diversification away from the U.S. dollar. Gold could reach about 4,500 USD/oz in a monetary-easing environment.
Read at London Business News | Londonlovesbusiness.com
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