ANZ on the conflicting signals for gold:
- Gold eased on Friday as a solid jobs report in the US strengthened the Fed’s case to use aggressive rate hikes to tame inflation. This saw Treasury yields surge higher and the USD rally, weakening investor demand.
- Nevertheless, the ongoing war in Ukraine is likely to see demand for the safe haven asset remain strong.
- Our gold valuation model of the spread between fair value and spot gold prices has shot from zero to USD300/oz since Russia invaded Ukraine, suggesting a hefty risk premium. In addition, the secondary impacts of the Russia-Ukraine crisis will provide a strong level of support. The broader isolation of Russia will see a structural shift in the energy sector, which will be inflationary.
TD note that despite higher Fed rates being not as positive for gold, Federal Reserve:
- "policy has a long way to go to be even neutral... and gold is going to continue to be fairly firm"
