Gold Portfolio Allocation Slows Down

Up- down, high- low, see- saw- Gold was totally on a contradictory move in the past few days. Well we can’t blame the precious metal for this confused behaviour. A host of global factors were responsible for creating this wave in the prices of precious metals. Firstly we saw gold touching several month highs over a softening dollar which was a result of lower than expected U.S data numbers. Gold prices recovered slightly from a two-day losing streak on Thursday amid growing uncertainty over a potential recession and the path of U.S. monetary policy. U.S. retail sales and industrial production data for December read weaker than expected on Wednesday, ramping up concerns over a broader economic slowdown in the country as it struggles with tight monetary policy and relatively high inflation. Then came in, one of the most influential factor – Interest rate hikes. The latest message delivered by Chairman Powell expressed that the Fed intended to slow the pace of interest-rate hikes in 2023. This message was reinforced by Patrick Harker- the president of the Philadelphia Federal Reserve. Reuters news reported that “he‘s ready for the U.S. central bank to move to a slower pace of interest rate rises amid some signs that hot inflation is cooling off”. Though gold prices dropped on Tuesday, gold stalled its ongoing corrective downside, staging a decent comeback on Wednesday. The US Dollar has reversed its early gains amid falling US Treasury bond yields, which has helped Gold price recover lost ground. Meanwhile, Gold price continued to benefit from increased bets of smaller US Federal Reserve (Fed) rate hikes, although the US Retail Sales and Producer Price Index (PPI) will help shed more light on the same. However later in the day , live gold price turned negative, erasing gains made on weak U.S. economic data yet staying above the $1,900 level, as key members of the Federal Reserve signaled their intent to keep pushing interest rates higher to combat inflation. The Federal Reserve raised its benchmark rate more aggressively last year than any other time since the 1980s. Beginning in March 2022 the Fed raised rates at every FOMC meeting with four consecutive jumbo 75-bps rate hikes. This took the Fed’s benchmark rate from 0-25 bps in February to 425-450 bps by the end of the year. The Federal Reserve is currently anticipating that they will raise rates until they reach their target of 5 ¼ to 5 ½% this year. Still, overnight comments from several Fed members, including Loretta Mester and James Bullard, called for more interest rate hikes, given that inflation is still well above the central bank’s annual 2% target. They also forecast that U.S. borrowing rates will likely peak around 5%, although most members supported a slower pace of hikes. "High interest rates often suppress the price of gold, as other investments become more attractive. However, central bank buying, particularly from developing countries turning away the dollar, has propped up the gold price." is what bullion dealers in India have to say. Now when we look at portfolio allocation, we really need to see the best performing assets Vis a Vis its counterparts. And for gold, the strongest contender is crypto. Gold and crypto currencies have sometimes been seen as competing for investor attention Of course, both crypto and gold can be a means of payment, a store of value and either is 'no-man's' liability. With the world becoming multi-polar, the latter point is important for central banks, especially in emerging markets. To that point, in the run-up to the war in Ukraine, Central Bank of Russia had reduced USD holdings while at the same time boosting exposure to gold. Nonetheless, gold has a solid and credible history and is way superior compared to others assets in its class. Precious metals, including gold, silver, platinum and palladium, have grown in prominence in recent years as viable investment alternatives to include in asset allocations. Asset allocation seeks to increase risk-adjusted returns through diversification, based on the principle that different assets perform differently under varying market and economic conditions. For several decades, investors have achieved this through traditional asset classes, such as stocks, bonds and cash. Though, currently, investment allocation in gold has halted for awhile, we believe that as things start to settle, and we start to see the outcome of gold price today rises, not only in the U.S. but globally we're going to start to see how gold will fit back into people's portfolio.

Gold Welcome 2023 With a Bang!

Nothing or nobody welcome 2023 with a bang the way gold did. The yellow metal had a glittering start to the year as it hit another six-month high on Wednesday, 4th January. Safe-haven demand is featured so far this first trading week of 2023, amid shaky global stock markets, global economic growth worries, rising Covid infections, the dollar and inflation worries- MINUTES - Gold price clanged to gains around $1850 following the release of the Federal Reserve’s Open Market Committee (FOMC) minutes for the last meeting, which emphasized the need for the central bank to tighten conditions amid stubbornly high inflation levels. The Federal Reserve released the minutes from last month’s FOMC meeting. Unanimously Fed officials agreed that the central bank should slow the pace of its aggressive rate hikes. This would allow them to continue to ratchet up the cost of credit to curb inflation. They continue to be worried that market participants have an inaccurate perception of hoping for rate cuts this year. However, they left the door open to tightening even more aggressively if inflation rises. Gold and silver prices did back well down from their daily highs ahead of the early-afternoon release of the minutes from the last Open Market Committee meeting of the Federal Reserve (FOMC). Bullion dealers in India were wondering if the minutes might produce a hawkish surprise. The December minutes showed that policymakers agreed to slow the pace of interest rate hikes but added that a slowdown is not a “weakening commitment to achieving price stability on that inflation is already on a persistent downward path.”  Fed officials added that the US central bank had made significant progress in moving to restrictive policies and added that no rate cuts would be necessary for 2023. In the minutes, officials noted that a slower pace of rate hikes does not mean an easing of financial conditions. The gold market was able to hold some of its daily gains following the release of the Federal Reserve's December meeting minutes, with price trading above the $1,850 an ounce level. At the December meeting, Fed officials confirmed their commitment to bringing down inflation and warned against "unwarranted" loosening of financial conditions. The meeting minutes also revealed that officials were worried about any "misperception" in financial markets around their actions. RISING COVID INFECTIONS- The rallies in the gold and silver markets this week also come amid worries about rising Covid infections in China continuing to crimp the world’s second-largest economy. SLOW ECONOMIC GROWTH- Global stock markets were mostly firmer overnight. U.S. stock indexes are higher today. Still, there is keener trepidation in the marketplace this week. Potentially slowing economic growth in the major industrialized countries along with problematic price inflation in 2023 are keeping traders pensive and prompting safe-haven demand for the precious metals Gold prices ticked higher on Thursday, aided by a softer dollar, while market participants braced for U.S. jobs data that could influence the Federal Reserve’s policy trajectory. INFLATION WORRIES- Additionally, policymakers added that inflation risks could be more persistent and that further increases to the Federal Funds rate (FFR) would be appropriate. Gold price today is holding close to the highest level in seven months above $1,860 in the European session, accelerating the upbeat momentum, as the US Dollar tumbled across the board following a hot start to 2023. U.S. DOLLAR- the US Dollar remains under heavy selling pressure, as the European equities opened higher. Further, the sell-off in the US Treasury bond yields gathered steam and exacerbated the pain in the greenback, allowing the non-yielding Gold price to extend its uptrend into the fourth straight session. Bullion is seen as a hedge against inflation, but rising rates dull non-yielding asset's appeal. The short-term expectation is that live gold price will climb to $1,880 per ounce and trade broadly around $1,800 for most of the year[Text Wrapping Break] Gold has had a good start to the year, helped by a weaker dollar and expectations that the Fed might slow its pace of rate hikes. Recession risks and central bank buying should also support bullion this year.