Gold: Can the post-election rally withstand headwinds? – ING

Gold has surged back above $4,000/oz following the Democratic sweep in the US midterms, supported by lower Treasury yields, a softer Dollar and robust central bank purchases, according to ING strategists Warren Patterson and Ewa Manthey. However, they warn that the near-term outlook remains difficult: inflation is sustaining expectations of tight monetary policy, while developments in the Middle East remain critical.

Can central bank demand counter monetary policy risks?

"Spot gold jumped more than 3% yesterday, climbing back above $4,000/oz following a Democratic sweep in the US mid-term elections. Expectations of legislative gridlock, lower Treasury yields and a weaker dollar are supporting the move."

"Meanwhile, central bank buying continues to provide underlying support, with official-sector demand remaining strong in September. Central banks added 61 tonnes during the month, according to the World Gold Council, while third-quarter purchases reached 228 tonnes (-7% year-on-year). Poland and China continued to lead purchases, reinforcing the structural demand story for gold."

"Despite the rebound, the near-term outlook remains challenging for the precious metal. Inflation concerns continue to support expectations for tighter monetary policy. But much depends on developments in the Middle East and what they mean for energy markets."

(This article was created with the help of an Artificial Intelligence tool and reviewed by an editor. Know more.)