Russia’s expansion into the Kharkiv region and the visible camaraderie between Russian President Putin and Chinese President Xi during Putin’s recent visit to Beijing are contributing to a narrative of a world order in flux, with profound implications for global stability and trade. These developments are bolstering the appeal of gold as a safe haven asset.
According to the IMF, gold demand from BRICS countries and emerging economy central banks has surged in recent years, driven by concerns over Western sanctions. Recent geopolitical events are likely to reinforce this trend, further supporting gold prices.
Additionally, gold is experiencing increased demand amidst growing expectations that the US Federal Reserve will move towards interest rate cuts. This shift in sentiment is driven by softer inflation and retail sales data for April. Although Federal Reserve members have been noncommittal about the timing of potential rate cuts, market indicators, such as the CME FedWatch tool, suggest a 65% likelihood of lower fed fund rates by September.
These factors collectively contribute to a positive outlook for gold, as diminished interest rate expectations reduce the opportunity cost of holding the precious metal compared to cash or bonds.
