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Can gold gain from rising macro uncertainty?

by WOOWinvest
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Can gold gain from rising macro uncertainty?


Experts believe that the Federal Reserve may soften its stance on policy tightening and macroeconomic uncertainty, which bodes well for gold, although they added that the outlook remains uncertain given the easing of geopolitical tensions.

The U.S. central bank raised its key interest rate by 25 basis points on Wednesday, a move largely ignored in light of higher U.S. inflation data in January and February and expected spillovers from sanctions on Russia on global energy and commodity prices. Digestion.

“As expected, the Fed skipped a 50 basis point rate hike given the geopolitical uncertainty and resulting growth fragility. The Fed’s less aggressive policy stance was welcomed by the market. Although the Fed Insist on more rate hikes, but it remains to be seen how it strikes a balance between containing inflation and supporting the economy’s recovery from the pandemic,” said Chirag Mehta, senior fund manager of alternative investments at Quantum Mutual Fund.

Economic indicators such as the U.S. Treasury yield curve, U.S. consumer confidence, and U.S. retail sales all point to a weak growth outlook.

“While the Fed is already behind the curve in containing inflation, ill-timed tightening comes with the risk of triggering a recession. In conclusion, a possible softening of the Fed’s stance on tightening and macroeconomic uncertainty bodes well for gold,” Mehta Add to.

The Russia-Ukraine war has also created uncertainty for the precious metal.

“In times of geopolitical crisis, the key question for gold is always whether economic and financial market risks are rising or falling. Currently, the gold market is reflecting the latter, although it is constantly assessing the situation,” said Carsten Menke, head of research at Julius Baer Next Generation. : “The gold market remains highly volatile and highly uncertain. As such, the gold market has taken a very rational stance on a war that affects us humans primarily emotionally. ”

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