Gold

Gold is the world's original reserve currency. The precious metal serves many functions today, including (1) as a barometer of US dollar liquidity conditions, (2) as a means of assessing geopolitical risks and (3) as a hedge against high rates of inflation. The precious metal is particularly sensitive to US real interest rates, with gold prices rising when real rates fall and vice versa. 

Outlook
Neutral

Daily update

Gold prices are currently slightly lower. Last week, the precious metal moved up for the third week in a row. While trading volumes in gold futures accelerated week-over-week for the first two weeks in October, volumes decelerated last week. The combination of rising prices and slowing volumes suggest that traders are running out of conviction in the move higher. Today's gold trading range is $1,179 - $1,231. 

Looking at gold today, the precious metal remains weighed down by a stronger dollar. While gold was flat at the outset of the day, the precious metal began falling during London trading hours after the euro began selling off. As weakness in the euro pushes the US dollar higher (all else held equal), gold prices remain under pressure. While US Treasury bond yields are slightly higher today, changes in the dollar appear to be dominating gold price action for now. Our outlook on gold remains neutral. 

After its recent top at $1,233, gold is now trading above $1,223.

Updated 

Gold Outlook

Outlook
Neutral

Updated 

Analysis

In our previous commentary on gold, we wrote that gold prices would keep falling for three reasons: (1) accelerating US inflation, (2) decelerating growth outside the United States and (3) an ongoing slowdown across emerging markets. Ultimately, all three factors were supportive for the US dollar, gold’s ultimate nemesis. Since that time (May 17), gold prices have weakened from around $1,290 to $…

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Tags: Gold

In our last take on the outlook for gold, we wrote that the combination of slowing growth outside the United States and rising inflation meant more weakness lay in store for the precious metal. When both US growth and inflation are high, the Fed is more likely to raise rates with the aid of supportive data. In an environment where US growth is outperforming its major peers, the US dollar also ten…

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Tags: Gold

Last week, we wrote that weakness in the US dollar is masking growing risks. As equities, commodities and corporate credit are inversely correlated to USD, investors need to pay attention to the risk of a US dollar rebound. Since early 2017, gold prices have gradually strengthened. As the precious metal serves as a barometer for US dollar liquidity, the clear message from gold was that monetar…

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Tags: Gold