The Federal Reserve maintains its aggressive monetary policy stance to drive inflation to its 2% target. This continues to have a negative impact on gold prices as it tries to hold above $1,900.
Investors should not give up gold!
But the latest research from the World Gold Council says investors shouldn’t give up on gold. He notes that the asymmetrical performance of gold will continue to support prices in the second half of the year. Juan Carlos Artigas, head of research at WGC, comments:
Gold will catch some of the upside if things go well. But even if things go wrong, it will protect you much better.
Gold prices are in “wait and see” mode
World Gold Council analysts expect gold to remain relatively stable at current prices until the end of the year. The neutral outlook emerges as gold is currently trading around $1,915. Artigas says gold is currently in “wait and see” mode as investors try to determine what impact the Federal Reserve’s aggressive monetary policies will have on the global economy. He adds that currently the markets see the potential for a slight contraction until the end of the year and until 2024.
However, he stresses that while recession fears have been pushed further, they are not completely priced out of the market. He says this risk is the reason why investors continue to allocate gold. According to Artigas, it is too early to tell what effect the Fed’s policies will have on the economy. Based on this, Artigas makes the following comment:
According to the price action we saw in the first half of the year, gold is pretty solid. It provides some support. Moreover, if there is further deterioration in economic conditions, including risks of unknown events, then there may be a more significant rise in gold prices.
Gold did exactly what it was supposed to do!
cryptocoin.comAs you follow, gold prices have recently dropped below $1,950. Despite this, Juan Carlos Artigas states that gold has outperformed bonds and cash this year. He adds that the only thing gold has not outperformed is advanced economy stocks.
WGC says gold prices gained 5.4% in the first half of the year. He also states that this coincided with the period when the S&P 500 rallied 14% year-to-date. Artigas states that gold does exactly what it’s supposed to do. The WGC report highlights the following:
Gold not only provided positive returns to investor portfolios, but also helped reduce volatility in the first half of the year, particularly during the mini-banking crisis in March.
There is no big drop for gold prices on the horizon!
Strong economic growth and robust labor market data are likely to continue to weigh on gold. That said, Artigas says WGC foresees a cap on how much gold prices can drop in the near term. The head of research notes that many winds affecting the precious metal are starting to weaken. Artigas states that markets are pricing in further tightening this year. Despite this, he says the Fed is close to ending the tightening cycle.
Artigas says the peak in interest rates means bond yields and the US dollar won’t rise any further. In that regard, “Many of the challenges we’ve seen for gold have been priced in. “We don’t see the conditions for a big sale under it,” he says. WGC, on the other hand, makes the following assessment in its report:
However, given gold’s positive first-half performance, it’s worth noting that investor easing needs to be serious for average 2023 gold prices to drop below the 2022 average of $1,800. Given the uncertainty inherent in forecasting global macroeconomic outcomes, we believe that gold’s positive asymmetric performance can be a valuable component of investors’ asset allocation toolkit.
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