1. Sala de redação
  2. Rate rise expectations are hammering gold
Menu
A UBP na imprensa 22.09.2022

Rate rise expectations are hammering gold

Rate rise expectations are hammering gold

Finanz und Wirtschaft (17.09.2022) - In August, gold prices started off with a rise, following the publication of lower US inflation data than expected.


Expectations of further interest rate rises are affecting the price of gold. This week, US ten-year yields rose to over 3.4%, reaching their highest levels since June, whereas gold moved in the opposite direction, falling from its high of USD 1,800 per ounce in March to under USD 1,670 – its lowest level since April 2020.

Investors have steadily reduced their gold holdings in recent weeks.

The latest Commodity Futures Trading Commission (CFTC) data show that speculators’ net long positions on the gold futures market have fallen sharply in the last few months and ETFs have been reducing their gold inventories. Investors have been voting with their feet and reducing their gold positions, because the combination of high short-term interest rates and lower inflation expectations has reduced gold’s appeal. The options market is also reflecting this new dynamic – three-month risk-reversals, which measure the cost of a gold put compared with a gold call, have fallen consistently in recent weeks – meaning that investors are becoming less bullish on the gold outlook.

Inflation

Markets believe that US inflation dynamics will soon peak in the current cycle and forward-looking indications are consistent with this stance. Freight and shipping rates have fallen, suggesting that supply-chain tensions have eased somewhat. Oil prices have also dipped, due to perceptions of stalling economic growth. As a consequence of these developments, real interest rates have risen, meaning the opportunity cost of holding gold has risen. Meanwhile, short-term interest rates have continued to increase, while inflation expectations are starting to ebb, explaining gold’s decline in recent weeks.

Coming into the fourth quarter, there is the possibility of further drawdowns for the yellow metal.

Assuming that the Fed proceeds to hike rates at its current pace, this will lead investors to reduce risk across the board. A move to levels of around USD 1,650 per ounce is possible, but we think that any substantial downside below this level is unlikely to be sustained.


Peter Kinsella Peter Kinsella
Global Head of Forex Strategy
VER PERFIL LINKEDIN
Expertise

Investing in biodiversity – why and how

How does the loss and restoration of biodiversity translate to investments?


A lire également

A UBP na imprensa 29.09.2022

Swiss bank UBP’s Nordic acquisitions boost European hub in Luxembourg

Delano (27.09) - Following the acquisitions of the teams and books of Banque Carnegie Luxembourg and Danske Bank International, UBP has strengthened its position in Luxembourg for cross-border clients. Patrick Casters, CEO of UBP (Europe) SA and Johnny Bisgaard, deputy CEO, talk about the bank’s “European hub”.

A UBP na imprensa 26.09.2022

The Rise of Fiscal Dominance

Hong Kong Economic Journal (09.2022) - The global economy is now increasingly dominated by fiscal policy, creating a hugely different investment landscape.

A UBP na imprensa 14.09.2022

UBP sees opportunities in Singapore's growing family office landscape

Citywire Asia (12.09.2022) - Singapore’s growth as a family office hub is an opportunity for Union Bancaire Privée (UBP), which has been historically associated with them in Europe.