Despite the aggressive monetary policy of the Federal Reserve aimed at reducing inflation to the 2% target level, it continues to put pressure on gold. According to recent research by the World Gold Council, investors should not give up on the precious metal as its asymmetric dynamics will continue to support prices in the second half of this year.
According to Juan Carlos Artigas, head of research at WGC, gold is currently in a waiting mode as investors do not yet understand the impact the Federal Reserve's aggressive monetary policy will have on the global economy. It is too early to talk about it. Concerns about a recession have intensified, and it is because of this risk that investors will continue to invest in gold.
If there is further deterioration in economic conditions, including the risks of unknown events, gold has a greater potential for growth.
This year, gold has outperformed bonds and cash, even despite a recent sell-off below $1950 per ounce. The only area where gold has not outperformed is developed economy equities. In the first half of the year, the price of the precious metal rose by 5.4%, while the S&P 500 rose by 14%.
Gold not only provided positive returns to investors' portfolios but also helped reduce volatility during the first half of the year, particularly during the March banking crisis. This is stated in the WGC report.
Moreover, many factors that have been holding back gold's growth are starting to weaken, and even though the Federal Reserve plans to tighten its monetary policy, it is still nearing completion. The peak in interest rates means that the yields on bonds and the U.S. dollar will no longer grow as aggressively.
The WGC report states that given the inherent uncertainty in forecasting global macroeconomic outcomes, the positive asymmetric indicators of gold can be a valuable component of investors' asset allocation toolkit.