Gold rose 0.8% last week, briefly touching a 10-week high of $4,408 as geopolitical tensions around the Strait of Hormuz and softer US inflation data supported demand. Fading Fed hike expectations, sustained ETF inflows and increasingly bullish hedge-fund positioning provided a tailwind, although the precious metals failure to break decisively through $4,400 suggests near-term momentum may be tiring, even though we think the backdrop is steadily improving.
The more fears around Fed interest rate hikes dissipate, the greater investors’ appetite will become for gold – but a return to the frenzied buying in January is very unlikely to return in a hurry.
- We can see gold trading above US$4,500 once the conflict around the Strait of Hormuz is resolved – hopefully sooner rather than later.
MM is bullish towards gold around US$4350/oz
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