The gold market continues to move in a narrow trading range. However, one bank remains impressed by gold’s relative strength even as it prepares to end February with a slight loss.
Gold actually performed well!
Ole Hansen, head of commodity strategy at Saxo Bank, says gold has held up well given the headwinds it has faced since the beginning of the year. Currently, US 10-year bond yields are hovering near a two-month high. Even in this case, spot gold fell only $6 compared to the January closing price. Currently, the yellow metal is trading around $2,033. In his last note, Hansen draws attention to the following points:
Despite the rising ‘cost’ of holding a non-interest-paying gold position and the market’s current obsession with AI-related stocks and cryptos, the yellow metal has performed well due to demand for physical gold as well as a softer dollar.
The harsh environment also negatively affects investment demand
Meanwhile, market expectations regarding the Federal Reserve’s monetary policy have changed significantly in the past month. That’s why Ole Hansen notes that bond yields remain high. Hansen added that the interest rate cut expectation, which was six at the beginning of the year, decreased to three levels. Markets see an over 60% chance of a rate cut in June, according to the CME FedWatch Tool.
cryptokoin.comAs you follow from , this difficult environment also negatively affects investment demand. Additionally, there were significant outflows in gold-backed exchange-traded products in the market. 44 tons of gold left the markets in February. Moreover, 95 tons have fled ETFs since the beginning of the year.
Saxo Bank maintains bullish outlook for gold and silver
Meanwhile, speculative interest in gold has fallen into a predictable pattern, with bullish bets increasing as prices test the $2,000 support and bearish bets being placed as the price approaches $2,050.
Despite the challenges, Saxo Bank maintains a bullish outlook for gold and silver. The Danish bank predicts that gold will rise to $2,300 this year. At the same time, Hansen sees the potential for silver to retest its 2001 highs of around $30.
It will help protect the grounds of their precious metals!
But Hansen says gold and silver investors need to be patient. In his note, Hansen underlines the following points:
We maintain a bullish outlook for gold and therefore silver. But as we’ve highlighted several times in recent months, both metals are likely to remain stuck until we get a better understanding of the delivery of future US rate cuts. Until the first cut occurs, the market can get ahead of itself at times, and in the process raise interest rate cut expectations to levels that leave prices vulnerable to a correction. With this in mind, the short-term direction of gold and silver will continue to be determined by incoming economic data and their impact on the dollar, yields, and most importantly, interest rate cut expectations.
While investment demand will continue to be challenged in the near term, Hansen says physical demand, led by Asian consumers and central bank buying, will help gold and silver maintain their solid footing.
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