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Investment demand for gold is holding up despite bouts of liquidation, with outflows from gold-backed ETFs increasing. The stronger USD and rising real rates have suppressed investor appetite, but strategists at ANZ Bank believe gold’s safe haven appeal will remain strong because of renewed volatility in the equity market and ongoing macro and geopolitical uncertainty. XAU/USD is extending the recovery to $1875 amid the dollar’s pullback.

Key quotes

“A stronger USD and fading prospects of a fresh stimulus package before the US election have triggered a sell-off. Nevertheless, all-time low yields, elevated inflation expectations, accommodative central banks and renewed volatility in the equity market all bode well for the sector.”  

“Investment demand for gold is still holding up, despite bouts of liquidation in goldbacked ETFs. Physical demand in Asian markets is improving with imports rising in both India and China ahead of festival seasons.” 

“Investors have turned their attention to PGMs, with rising net ETF inflows. We expect platinum to benefit from being cheaper than palladium and from a spill-over from a stronger gold price. A weakening recovery in automobile sales could be a headwind for palladium prices.”