Bullish Momentum for Gold Predicted Amid Central Bank Demand and Rising Real Yields
Gold’s Winning Streak Takes a Pause
Gold prices exhibited a minor setback, halting a remarkable five-week winning streak on Friday. Despite this temporary dip, experts believe that the bullish trajectory for the yellow metal remains intact. Factors like increasing central bank demand and a shift in outflows from gold exchange traded funds offer substantial support to this optimism.
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Market Volatility Plays its Part
The price of gold experienced a modest 0.3% increase, reaching $2,348.75. Nonetheless, earlier in the week, it faced significant losses due to decreased tensions in the Middle East. The reluctance of Iran and Israel to escalate conflicts contributed to the decline in gold prices.
Predictions and Projections
Morgan Stanley has forecasted a bumpy but upward trend for gold prices. The odds favor a bullish scenario, with gold potentially reaching $2,760 per ounce in the latter half of the year. This outlook contrasts with a bearish projection of a drop to $2,000 per ounce.
Outlining Demand Dynamics
The consistent demand for gold has enabled it to withstand the pressure of rising real interest rates. Traditionally, gold has shown a negative correlation with real yields, but recent market conditions have reversed this trend, demonstrating a positive correlation due to dominating fundamental drivers.
Factors Fueling the Gold Surge
Central bank acquisitions of bullion, especially spearheaded by the People’s Bank of China, alongside demands for safe-haven assets amidst geopolitical tensions and an increasing need for an inflation hedge, continue to uplift gold prices.
Strengthening Trends in Gold Consumption
In China, gold consumption surged by 5.94% in the first quarter, reaching 308.91 tons. The People’s Bank of China sustained its gold reserve increment for the 17th consecutive month in March, culminating in a total reserve of 2,262.67 tons by the end of Q1.
Turning Tides for ETFs
