Gold to trade in 'uncharted territory' after breaching this price level on reignited recession risk - ANZ gold recession Fed
After testing record highs just over a week ago, gold is looking at a broad range between $1,900 and $2,100, with ETF investors waking up in light of renewed recession risk, said Australia and New Zealand Banking Group in its latest note.
At the same time, any hawkish Federal Reserve sentiment could trigger a selloff down to $1,900, they added. "We expect gold ETF flows to turn positive for the rest of this year," the strategists said Friday."U.S. banking sector issues, elevated interest rates and uncertainty around the debt ceiling are dampening the economic outlook and boosting safe-haven demand for gold."
Another big unknown is the U.S. debt ceiling crisis, with the June 1 deadline just over two weeks away. During the 2011 debt cap negotiations, the U.S. saw its credit rating downgraded, which led to lower U.S. dollar and higher gold prices."In 2011, total ETF inflows amounted to 161t until the debt ceiling was raised in August 2011," the note said.
"Russia and China bought nearly 60% of total purchases in 2010−22, and this is likely to continue, although the drivers of that activity may shift. As China aspires to increase the CNY's role as a reserve currency, gold buying is set to increase. And gold is an attractive proposition for a sanction-burdened Russia," ANZ noted."While gold is not a complete hedge against sanction risks until it is stored domestically, it does play a role in mitigating the impact of sanctions.
"The devaluation of the USD is another factor motivating EM central banks to diversify their reserves. Gold normally preserves its value while currencies have lost purchasing power due to the quantitative easing where they increased money supply by printing money," Hynes and Kumari said.
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