Market analysis on behalf of Chris Weston Head of Research at Pepperstone

It’s been a confusing few days for those involved in the gold market and we see gold trapped between $2480 and $2353. With so many in the market having subscribed to a US hard landing thesis, and a synchronized global growth slowdown, amid ongoing geopolitical tensions, one could have made a clear case for gold to be above $2500 in this dynamic. What has transpired though is gold being caught up in a broad liquidation of well-owned positions, where the classic fundamental case for gold was tossed aside, with market participants selling almost everything, and buying bonds.

With calmer heads now prevailing, we’re now seeing increased flows into gold ETFs, and gold buyers supporting the 50-day moving average. However, with the JPY finding sellers and various recently beaten-up equity indices finding a better tone, there is a clear hesitancy to really go after gold upside here. Traders remain cognisant of the risk of a further liquidation in risk assets if the data does indeed come in weaker from here, validating those calling for a US recession -However, with US real rates likely to move lower should that play out, one could then argue that this time around gold could find a better bid as a recession hedge – perhaps the difference this time around is that the JPY seems arguably the better portfolio hedge and this should therefore limit the upside in the near-term until clarity resumes.