Gold will gain through Q4 on sovereign, safe haven buying, Fed rate cut would magnify the move – ING’s Manthey

In the bank’s monthly update, Manthey noted that gold prices have gained over 15% so far this year, and the precious metal is one of the best-performing assets of 2024.

She pointed out that the gains were driven primarily by safe-haven demand from the conflicts in Ukraine and the Middle East, along with central bank buying.

“Gold traded above $2,300/oz for most of the second quarter and recorded its third-straight quarterly gain, marking its best run since the Covid pandemic,” she said.

“The precious metal set record after record in the first half of the year despite the US Federal Reserve keeping interest rates high, strength in the US dollar and divergence in US Treasury 10-year yields and ETF holdings and gold prices. We believe gold is poised to keep its positive momentum going in the second half amid the current global geopolitical and macroeconomic landscape while central bank demand is expected to grow.”

Gold is also getting a boost from rising market expectations for a U.S. interest rate cut as recent economic data supports the case for a Fed pivot.

“The Fed has held its key policy rate in a target range of 5.25% to 5.5% – the highest level in more than two decades – since last July,” Manthey wrote. “However, last week’s poor economic data has bolstered the prospect of the Fed pivoting to monetary easing as soon as September. Data from the US Bureau of Labour Statistics showed US hiring and wage growth cooling in June while the jobless rate edged up. Swap traders are now pricing in a 75% chance of a rate cut in two months.”

“Our US economist believes September is in play for a first Fed rate cut and looks for three cuts this year versus the two cuts currently priced by markets with the Fed funds down at 4% by next summer,” she added.

Manthey said that while central banks did 10 tonnes of net buying in May, sovereign demand still moderated during the month.

“May’s purchases were led by emerging market central banks with the National Bank of Poland the largest gold purchaser, followed by the Central Bank of Turkey and the Reserve Bank of India, according to data from the World Gold Council (WGC),” she said. “However, China has seen a slowdown in gold purchases over recent months. The People’s Bank of China didn’t add gold to its reserves for a second consecutive month in June.”

“We still expect central bank demand to remain strong looking ahead amid the current economic climate and geopolitical tensions,” Manthey added. “The recent WGC survey indicates that central bank purchasing will remain strong, with 29% of central bank respondents intending

Posted by:
Jack Dempsey, President

401 Gold Consultants LLC

jdemp2003@gmail.com