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Talking Points:

Fundamental Forecast for Spot Gold: Neutral

Gold continues to oscillate in a remarkably tight trading range. In fact, with a span of little more than $33 over the last 25 days of trading, we are looking at the most complacent period of trade for the precious metal since 2007. What is truly remarkable about this restraint though is that it comes amid considerable fundamental discussion – the type of which would normally facilitate a charge to the precious metal. A downgrade in global monetary policy forecasts, talk of fading confidence in global financial markets, fears of flare ups among global powers and even a simple drop in the US Dollar have all rendered little from this universal asset.

Monetary policy speculation doesn’t just hold its sway over exchange rates. We have seen extremely accommodative central banks spill over to benefit capital markets as the abundance of cheap capital encourages investment in traditional assets like shares – or you could view it the other way around whereby extremely low yields translates into little meaningful return to be made and need to chase capital gains. Gold also sees a sensitivity through this theme as it is distinctly an asset that does not provide yield. In a world where rates seem to be on the rise, the value of gold – strictly due to price fluctuations – becomes less appealing. That said, this past week, rate expectations continued to slide. The ECB, BoE’s and BoC’s intentions were downgraded over previous weeks, and the FOMC minutes gave evidence to suggest the US central bank could slow its pace through 2018. Perhaps Fed Chair Yellen’s testimony next week and the Fed’s-favored inflation indicator (PCE deflator) will stir a little more life into the discussion.