The Gold price is reaching new heights, with last week’s all-time high being scratched and the potential for further increase. However, Commerzbank’s commodity analyst Barbara Lambrecht cautions that the upward momentum may be fading.
Upward Momentum Fading Away
Lambrecht explains, “Some expectations of interest rate cuts have already been factored in, which may be dampening the current surge. Despite this, the impact of the high price level on physical demand for Gold in China, the largest sales market, seems to have eased slightly. Gold imports from Hong Kong have increased by 6% compared to the previous month, with a net increase of 17% in terms of excluding exports.”
She further adds, “Although the numbers show improvement, they still remain relatively low compared to the average purchases in the first three months. This could be attributed to the absence of further purchases by the Chinese central bank since May.”
“On the other hand, ETF investors are showing renewed interest, albeit cautiously. Holdings have increased by almost 3% from the multi-year low in mid-May, reaching levels last seen in mid-February.”
Analysis and Impact:
As the Gold price continues to climb, investors should be mindful of the potential loss of upward momentum. The influence of interest rate expectations and physical demand in China are key factors to watch. The buying interest from ETF investors indicates a cautious optimism in the market, but the overall trend remains uncertain. It is important for investors to stay informed and consider the implications of these developments on their investment decisions.