FX.co ★ War of gold against the dollar

According to analysts from ANZ Research (Australia, New Zealand, and Asia), gold is increasingly regaining its luster. Even when the U.S. dollar index reached a six-month high amid rising Treasury yields, gold briefly dipped below the $1,900 level. This indicates the resilience of the precious metal and is an excellent sign of increasing demand.

It is more likely that the strength of the U.S. dollar will decline in 2024. High interest rates can increase the burden on corporate debt, which will have negative consequences for economic growth. Despite the expected continuation of the U.S. dollar's strength until the end of the year, expectations of rate cuts and slowing economic growth are likely to lead the U.S. dollar back into a downward trend, especially in the following year. Consequently, this is positive for the yellow metal. The investment attractiveness of gold will increase with growing macroeconomic uncertainty and expectations of monetary policy easing.

According to data from the World Gold Council (WGC), by 2023, investors had liquidated 130 tons of strategic investments (gold ETF reserves). Europe and North America are leading the outflows. This year, Asia has seen an inflow of 9.1 tons, with 6 tons arriving in August alone. The weakening yuan and reduced consumer confidence are driving funds into gold. A weak yen has also supported ETF inflows in the Asian region.

A report from the WGC states that retail investor interest is on the rise. In August alone, sales of gold coins in the United States increased to 85,500 ounces. And with the weakening Chinese yuan and volatility in stock markets in China, retail investors are also gaining momentum.

Central banks in many countries are not delaying in increasing their gold reserves either. Geopolitical tensions are leading to a structural shift in central bank purchases.

According to ANZ analysts' forecasts, demand is expected to rise to 750 tons in 2023 but will not reach the record 1,080 tons seen in 2022.

Additionally, demand for physical gold is expected to increase in the fourth quarter of this year.