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Gold prices are depressed by rising bond yields and a strong dollar, but not for long. In the view of Joanne Goh, Strategist at DBS Bank, a dovish Fed will continue to support XAU/USD while growing concerns on currency debasement should continue to hail gold as a safe-haven asset.

Key quotes

“We believe the upside for Treasury yields is capped at 1.5% this year, as the Federal Reserve is very unlikely to hike rates in the immediate two years. We believe this has already been priced into gold prices as there has been a bout of upgrades for yield forecasts by consensus in the past one month. In other words, we are nearer to the top than the bottom as far as bond yields are concerned.”

“If Biden’s $1.9t stimulus is pushed through, we would expect quantitative easing (QE) to expand to support the spending plan. The Fed’s Chairman Jerome Powell again signalled that it is not close to curbing policy support until substantial progress has been made on achieving maximum employment and a 2% inflation target.” 

“The Fed is buying $120b per month of US Treasuries and mortgage backed securities currently. Its balance sheet size is at $7.6t and we expect the size to increase to $10t by the end of next year. Given the outsized liquidity, we believe there is huge upside potential for gold prices.”

“We believe the place for gold as a hedge in uncertain times still stands. Runway inflation, equity markets breaking new highs, high debt levels, concerns over currency debasement as a result of money printing, as well as rising geopolitical risks, are all good reasons to hold gold as a risk diversifier. We reiterate our gold price target of $2,300.”


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