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18.10.202211:32 Forex Analysis & Reviews: Stable physical demand for gold and silver indicates where prices will move

Exchange Rates 18.10.2022 analysis

Sustained inflation will force the Fed to aggressively raise interest rates through the end of the year, which, in turn, will maintain the sharp decrease in gold and silver prices.

In a panel discussion during the London Bullion Market Association's annual conference, participants broadly agreed that gold and silver could struggle for the remainder of the year as rising interest rates and sustained dollar momentum keep investment capital out of the market. However, sentiment remained bullish on the long-term potential, even despite the short-term headwinds

Panellists agreed that inflation remains a global problem, so the Fed must maintain its aggressive stance to cool the global economy. John Rede, chief market strategist at the World Gold Council and moderator of the discussion, said that in the current environment, he does not see a weakening US dollar scenario anytime soon.

But even if the Fed continues to raise rates through the end of the year, some panellists are skeptical if it can achieve its goal. Darren Botha, portfolio manager at DRW Investments, said it is unlikely that the US central bank will change its tactics anytime soon, but it will not be enough to bring down inflation.

Going back to gold, most panellists were bullish in the long term, but some are pessimistic, such as Kathleen Kelly, founder and CEO of Queen Anne's Gate Capital. She said she expects weak investment demand to put pressure on gold prices. She also noted that during the pandemic, investors flocked to gold-backed ETFs, pushing it to an all-time high. However, most of this investment capital is under water, and the continued outflow of gold ETFs could push prices down to $1,350 an ounce.

Exchange Rates 18.10.2022 analysis

But even though paper markets for precious metals have been weak, physical demand for gold and silver remains exceptionally strong, especially in Asia and the Middle East. Panellists said this will provide some support to the precious metal and eventually attract new investment capital.

Amir Ravan, portfolio manager at Bluecrest Capital Management, noted that there is a solid bloc of countries buying gold and trading among themselves to diversify away from the US dollar, not to mention it has no geopolitical overtones.

Matt Slater, global head of precious metals forwards and physical trading at UBS, also said the physical demand for gold and silver shows just how big the market is. He added that refineries around the world are working hard to keep up with demand

Darren Botha also sees strong demand for gold.

*La presente analisi del mercato ha un carattere esclusivamente informativo e non rappresenta una guida per l`effettuazione di una transazione.

Irina Yanina,
Analytical expert of InstaSpot
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