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Gold, which rose 5.4% in H1 2023 outperforming all other major assets apart from developed market stocks, is expected to remain supported on the back of rangebound bond yields and a weaker dollar, according to a report on Thursday by the World Gold Council (WGC).
"Gold should experience stronger investment demand if economic conditions deteriorate. Conversely, a soft landing or much tighter monetary policy could result in disinvestment," the Mid-year Outlook 2023 said.
As of this week, the broad expectation is for the US Federal Reserve to raise the benchmark rate by 25 basis point hike to a range between 5.25% and 5.5% at its July 25-26 meeting. According to CME’s FedWatch tool, investors see a more than 92% chance of a 25-basis-point hike in July. Rising interest rates dampen demand for gold which is seen as a zero-yield asset.
On Friday morning, gold prices were lower on robust US jobs data and comments from a top Fed official hinting at support for the rate hikes. Spot gold was flat at $1,910.20 per ounce, but down 0.5% for the week.
US gold futures were little changed at $1,916.00, according to Eikon data.
Prices hit a high of $2,072/oz in early May but began slipping soon after and ended June at $1,912.25 per ounce.
According to the WGC report, the precious metal not only contributed positive returns to investor portfolios, but it also helped dampen volatility throughout H1, especially during the mini-banking crisis in March.
A combination of factors such as the relatively stable US dollar and interest rates, event risk hedging and continued central bank demand contributed to gold’s performance, the report said.
(Reporting by Brinda Darasha; editing by Seban Scaria)