As February concludes with a marginal loss for gold, Ole Hansen, Head of Commodity Strategy at Saxo Bank, remains impressed with the yellow metal’s relative strength, noting its resilience amidst headwinds faced since the beginning of the year. Spot gold is currently trading around $2,033 per ounce, merely $6 lower than January’s closing price, even with U.S. 10-year bond yields holding near a two-month high.
Hansen points out that despite the rising cost of holding a non-interest paying gold position and the market’s focus on AI-related stocks and cryptocurrencies, gold has fared well. This resilience is attributed to underlying demand for physical gold and a softer dollar.
While bond yields remain elevated due to shifting expectations surrounding the Federal Reserve’s monetary policy, Hansen acknowledges that rate cut expectations have reduced from six at the start of the year to three. The CME FedWatch Tool indicates a more than 60% chance of a rate cut in June.
Despite significant outflows in gold-backed exchange-traded products, Saxo Bank maintains a bullish outlook for gold and silver. The bank anticipates gold prices pushing to $2,300 per ounce this year, with silver potentially retesting its 2001 highs around $30 per ounce.
Hansen advises investors to remain patient, emphasizing that both metals are likely to remain range-bound until there is more clarity on the delivery of future U.S. rate cuts. The short-term direction of gold and silver will depend on incoming economic data, their impact on the dollar and yields, and rate cut expectations.
While investment demand may face challenges in the near term, Hansen highlights that physical demand, driven by Asian consumers and central bank purchases, will help maintain solid support for gold and silver.
