Gold shows early signs of reclaiming safe-haven appeal after Iran war selloff
Gold prices have rebounded 9% in August to around $4,400 an ounce, suggesting the metal is regaining favour with institutional investors and central banks. The rebound is attributed to lower oil prices and softer US inflation data.
Intelligence analysis by Llama
Gold's price rebound suggests central banks or sovereign wealth funds may have been active in buying the metal. However, the upside for bullion is limited by faltering talks to end the Iran war, subdued jewellery and coin demand, and flows into gold-backed ETFs.
Gold's price is going up because people are buying it again. This is good for gold because it means people think it's a safe place to put their money. However, there are some things that might make gold's price go down again, like the war in Iran and people not buying as much gold as they used to.
Analysis
Gold's Price Rebound: A Sign of Safe-Haven Appeal Revival
Gold's price rebound in August to around $4,400 an ounce suggests that the metal is regaining its safe-haven appeal. This is a significant development for investors and central banks as it may impact their investment decisions. The rebound is attributed to lower oil prices and softer US inflation data, which have reduced expectations for future rate hikes.
Central Banks and Sovereign Wealth Funds: A Possible Source of Support
The strength of the price rebound over the past two weeks suggests that central banks or sovereign wealth funds may have been active in buying the metal. This is an inference rather than confirmed knowledge, but it is a possible source of support for gold. Another likely source of support was institutional demand for large bars as premiums in Asian trading hubs, including China, implied renewed buying interest.
Limiting the Upside for Bullion
However, the upside for bullion is limited by several factors. Faltering talks to end the Iran war, subdued jewellery and coin demand, and flows into gold-backed ETFs are all headwinds for gold. According to the World Gold Council, these ETFs added only $7 billion to $582 billion of assets under management in the first half of August. Technical signals also act as a headwind: the relative strength index suggests gold is approaching near-term 'overbought' levels, keeping the 200-day moving average, currently at $4,504, as a strong resistance level.
Key points
- Gold's price has rebounded 9% in August to around $4,400 an ounce.
- The rebound is attributed to lower oil prices and softer US inflation data.
- Central banks or sovereign wealth funds may have been active in buying the metal.
- Faltering talks to end the Iran war, subdued jewellery and coin demand, and flows into gold-backed ETFs are headwinds for gold.
- Technical signals suggest gold is approaching near-term 'overbought' levels.
If the Iran war talks succeed and oil prices remain low, gold's price may continue to rise. This is because gold is seen as a safe-haven asset, and people may be more likely to buy it if they feel safe. Additionally, if interest rates remain low, gold-backed ETFs may continue to attract investors, which could also support gold's price.
However, if the Iran war talks fail and oil prices rise, gold's price may fall. This is because gold is often seen as a safe-haven asset, and people may be less likely to buy it if they feel less safe. Additionally, if interest rates rise, gold-backed ETFs may lose investors, which could also support a decline in gold's price.
