Union Bancaire Privée – UBP is maintaining its prudent stance on gold and stand by its conviction that the yellow metal will probably remain range-bound for the months to come …
… on the one hand it will continue to be seen as a safe haven and to benefit from the ultra-low interest rates worldwide, as long as most central banks keep up some form of QE or monetary easing; on the other hand its price upside will remain capped by expectations of a possible Fed rate hike before the end of this year.
Some disappointing US macro data for August (job creation and the two ISM indices) had dampened expectations that the Fed will raise rates in September or at the latest by the end of the year; however, the latest hawkish statements from Fed members – such as Dennis Lockart, Jeff Lacker and, surprisingly, the historically rather dovish Eric Rosengren of the Boston Fed – have revived those expectations somewhat. However, the very dovish Fed Governor Lael Brainard, true to form, continued to urge for caution until the Fed sees clear evidence of inflation.
The probability of a Fed move at the next FOMC meeting on 21 September is now clearly more remote, but, even if the Fed maintains the status quo, we have no doubt that Fed officials will continue talking up rate expectations, thus keeping a lid on the gold price.
All of this of course only applies provided the last few days’ explosions and stabbing in the US do not revive and raise fears of terrorism. But so far gold has barely reacted to those incidents.
Névine Pollini – senior equities and commodities analyst – Union Bancaire Privée – UBP