Recently, the World Gold Council, published, Gold Market Commentary (GMC), Select elections and Fed on a dime. The GMC said, gold prices retreated to US$2,048/oz by the end of February, a 0.3% m/m fall. Nonetheless FX volatility has ensured that y-t-d returns remain positive in four of the major currencies.
As per our Gold Return Attribution Model (GRAM), a sharp move higher in the US 10-year Treasury yield (+34bps) appeared to be the major culprit in driving gold lower -understandable given the barrage of positive inflation and economic surprises over the past two months.
Aggressive risk-on positioning driven by continued outperformance from the Magnificent Seven (Mag7), amid the AI frenzy, also likely contributed to gold’s lacklustre performance this month. But the gold price staged a comeback on the last day of February, since when it has moved above US$2,100/oz.
In a looking forward view, the GMC said, 1: Iran’s parliamentary elections shouldn’t in themselves create waves, but the country’s consumers are major gold buyers and their elections could pave the way for an important political secession. 2: The March Fed meeting is important: it will provide investors, following a slew of strong data, with the first set of dot plots since December’s dovish tilt. Even though markets have priced out a cut, the argument for is as vehement as the argument against. Uncertainty reigns in monetary policy.