1. Newsroom
  2. Gold on the rebound, ahead of ECB and FOMC meetings
Menu
Insight 10.03.2016

Gold on the rebound, ahead of ECB and FOMC meetings

Gold on the rebound, ahead of ECB and FOMC meetings

Since the beginning of the year sentiment on gold has improved, mainly as a result of concern about a global economic slowdown, of the perception that most major central banks will maintain their loose monetary policies, and of the fear that negative rates will become generalised.


Since the beginning of the year sentiment on gold has improved, mainly as a result of concern about a global economic slowdown, of the perception that most major central banks will maintain their loose monetary policies, and of the fear that negative rates will become generalised. However, intriguingly enough, since mid-February the yellow metal has continued to edge up, hitting its highest level in a year despite the equity markets’ recovery and the stable US dollar. Last Friday gold even shrugged off the promising US employment report as it had done a week earlier with the strong GDP. At least one rate hike this year has been priced in by the market but the situation should become clearer as to the Fed’s intentions and maybe the timing of its next hike at the 16 March FOMC meeting. This could weigh on gold, as would an announcement on 10 March by the ECB of aggressive new stimulus and/or a rate cut.

Inflows into ETFs are at their fastest pace since 2010, indicating strong investor demand. Furthermore gold is being underpinned by strong Asian physical demand, with India’s gold imports surging 62% in January year on year, while gold appetite in China is also expected to keep growing, whetted by the risk of a yuan devaluation. Despite this we remain prudent on gold for the time being as we believe that in the short term the metal could be due for a pull-back, weakened by the ECB’s and FOMC’s strategies. However, we do not dismiss the possibility that gold could continue to be boosted by a variety of factors such as geopolitical tensions (the Middle East, the North Korea missile threats) and a potential Brexit.

POLLINI_Nevine_UBP_72dpi-0628.jpg
Névine Pollini, Equity Analyst

Newsletter

Sign up to receive UBP’s latest news & investment insights directly in your inbox

Click and enter your email address to subscribe

Expertise

Impact investing - Creating the future now

The role of impact investing is to strive to solve the world’s most pressing problems by identifying compelling long-term investments.

Read more

Most read

Insight 15.10.2018

Global Equities: P/E de-rating in progress

Spotlight - The broad-based sell-off in global equities has fully retraced the gains made from February 2018’s lows. Even world beating technology shares have fully given up the 8% gains seen over the summer.

Insight 08.10.2018

The latest on the oil market

September saw WTI oil prices drop 4% during the first week of the month before rallying almost 12% to reach USD 75 per barrel at the beginning of October. The rally came as investors have been gauging OPEC’s ability to replace falling Iranian exports and declining Venezuelan production.
Insight 17.10.2018

Impact investing - Creating the future now

The role of impact investing is to strive to solve the world’s most pressing problems by identifying compelling long-term investments.


Further reading

Insight 08.11.2018

UBP Investment Outlook 2019

Opportunities and Threats in a Desynchronised World

Insight 01.11.2018

US Congressional elections - November 2018

Spotlight - US Congressional elections are set to take place on 6 November.