Gold started the week down a little, falling nearly 1% to $1,965.70 per ounce.
“One key reason is surging treasury yields. Also market seems to be pricing in on the FOMC meeting on Wednesday at which the Fed may start to kick off the tightening cycle. So, this is a negative factor for gold,” said Margaret Yang, a strategist at DailyFX. Yang went on to discuss the situation in Ukraine, noting that the worst of it may be over as peace talks begin. The conflict had helped stoke gold prices for the past couple of weeks.
Benchmark U.S. 10-year Treasury yields reached 2.09%, their highest point since July 2019, as the U.S. Federal Reserve is widely expected to raise interest rates by a quarter of a percentage point.
Despite Modest Dip, Gold Could Finish the Year at $2500, Says Expert
“Markets may be facing an extended risk-off reversion period, which we see as essential to reduce inflation pressures. Gold stands to be a primary beneficiary, potentially along with U.S. Treasury long bonds and Bitcoin,” said Bloomberg Intelligence senior commodity strategist Mike McGlone. “Gold is poised to cross the $2,000 rubicon … Potential end game for 2022 – $50 crude, $2,500 gold, recession.”
Gold’s trading has been in a narrowing wedge pattern, which McGlone noted may be prone to breaking toward the upside.
“We view the metal as a leading potential 2022 end-game performer, notably when commodities priced for supply shocks succumb to inevitable demand destruction,” McGlone said. “We see gold gaining store-of-value demand, along with Bitcoin, from portfolio managers seeking alternatives for recession risks and overdue reversion in equities.”
McGlone drew parallels between 2022 and 2008, which spurred an enduring gold bull market and a bear market for crude oil. He described the war in Ukraine as a catalyst that will accelerate the process of greener technologies replacing fossil fuels.
With $2500 as a potential end price for gold, investors might want to get in on a bull market early and get exposure to physical gold through the Sprott Physical Gold Trust (PHYS). Another tactic for exposure to gold is to invest in gold miners through the Sprott Gold Miners ETF (SGDM) and the Sprott Junior Gold Miners ETF (SGDJ).
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