Gold: Headwinds weigh on post-election rally – ING

Gold’s recovery above $4,000/oz following the Democratic sweep in the US midterms has been supported by lower Treasury yields, a weaker dollar and robust central bank purchases, according to ING strategists Warren Patterson and Ewa Manthey. However, they warn that the near-term outlook remains difficult: inflation is sustaining expectations of tight monetary policy, while developments in the Middle East remain critical.

Central bank buying counters monetary policy risks

"Spot gold jumped more than 3% yesterday, climbing back above $4,000/oz following a Democratic sweep in the US mid-term elections. Expectations of legislative gridlock, lower Treasury yields and a weaker dollar are supporting the move."

"Meanwhile, central bank buying continues to provide underlying support, with official-sector demand remaining strong in September. Central banks added 61 tonnes during the month, according to the World Gold Council, while third-quarter purchases reached 228 tonnes (-7% year-on-year). Poland and China continued to lead purchases, reinforcing the structural demand story for gold."

"Despite the rebound, the near-term outlook remains challenging for the precious metal. Inflation concerns continue to support expectations for tighter monetary policy. But much depends on developments in the Middle East and what they mean for energy markets."

(An editor reviewed this article, which was produced with the assistance of an Artificial Intelligence tool. Find out more.)