As the capital markets await on a Fed pause on rate hikes, gold and palladium have been ticking higher. A pause may signify that eventually monetary policy easing could emerge as was expected heading into 2023.
As reported by CNBC, rate decisions by the U.S. Federal Reserve this week also include central bank decisions from the European Central Bank (ECB) and the Bank of Japan (BOJ). Gold prices have risen by 7% so far this year and more incoming economic data could continue to sway the precious metal one direction or the other.
“The precious (metal) may display sensitivity to the latest U.S. CPI report and may weaken if the Fed moves ahead with a hawkish pause. A surprise hike may trigger an aggressive selloff,” said Lukman Otunuga, senior research analyst at FXTM.
“Although markets expect the Fed to pause this week, the unexpected rate hikes from the Bank of Canada and Reserve Bank of Australia have left investors on edge,” Otunuga added.
In the meantime, to get gold price exposure, investors can consider the Sprott Physical Gold Trust (PHYS). The fund provides an enhanced physical bullion structure. It offers the ease of purchase and sale that comes with being traded on an exchange.
Palladium Pushes Higher
Gold is also joined by palladium prices also ticking higher. Unlike gold, palladium offers investors an industrial metal that has use cases beyond a store of value — namely its use in emissions control devices.
Of course, that could be challenged especially given the global transition to more renewable energy sources. This includes a higher usage of electric vehicles (EVs), which could tamp down demand for palladium.
“Palladium could head back above $1,500 in the fourth quarter of this year owing to improving automotive production, however this is currently under pressure from destocking by the automakers,” said Jacob Smith, Senior PGM analyst at Metals Focus.
However, if investors do want exposure to palladium despite the risks, consider the Sprott Physical Platinum and Palladium Trust (SPPP). SPPP provides a secure, convenient, and exchange traded investment alternative for investors who want to hold physical platinum and palladium.
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