Gold Price Forecast: XAU/USD to offset Fed rate hikes by virtue of safe-haven demand – ANZ

Gold’s geopolitical risk premium eased amid peace talks between Russia and Ukraine. A stronger USD and the prospects of a more aggressive rate hike cycle also weighed on sentiment. Strategists at ANZ expect the yellow metal to offset prospects of aggressive tightening thanks to safe-haven demand amid prolonged Ukraine conflict.

Gold investment demand is rebounding

“The US Federal Reserve raised rates by 25bps at its meeting last week. Its dot plot showed the median for the next two years is exceeding long-term projections. While an aggressive rate hike cycle remains a key headwind, this should be offset by strong safe-haven demand amid the uncertainty created by the ongoing war in Ukraine.”

“Investment demand has seen strong inflows since February, with ETF net flows rising to 202t year-to-date. This follows a net liquidation of 300t in 2021. Investors have also added net-long positions of 233t of gold in futures.”

“Physical gold demand in India and China could be impacted by higher gold prices and the prospects of slower economic growth. Deteriorating gold spot premium in India and China suggests weakening physical offtake.”