2023-08-06 19:40:00
Q: How has the price of gold performed this year, and how do factors such as monetary policy affect its prices?
A: This year we saw two things. First, monetary policy remains a headwind. The opportunity cost, the rotation of assets in the portfolio, the behavior of risky assets, the way people approach risk assets, this is a period of time where we are seeing headwinds for gold. Consumers are not looking for gold in those periods of interest rate movements and risky assets.
Once consumers have allocated the assets they have, they return to gold and put into their portfolios these holdings in varying proportions of 3%, 5%, 10% of the portfolio. Therefore, the behavior of prices this year was linked to that variable, which is interest.
But throughout the year, we also had systemic events or moments that force themselves like the banking crisis for lack of a better way to deal with it, and periods where the crisis dominated, where people say, “Hey, look, I have to make sure I can maintain my pool of assets. My real assets, my safe haven assets, must go up.”
When the Fed can calm down the economy, once that starts to get better, that monetary policy will loosen, and the gold recovery will begin. What we’re seeing now is range-bound pricing in the gold market. Therefore, you see us maintaining a stable level at $1850, $1900, or approximately $1950, but we did not depart from this range. We had a brief period earlier in the year with that banking crisis where prices really broke out of that range, but it didn’t get any bigger than that. The reason is simply that most institutional investors have not returned to the market. The range bound pricing behavior we are seeing is due to a lot of the buying being done by central banks, which is a trend we have seen for a long time.
JPMorgan recommends cash and gold and reduce stock holdings
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