Gold Defies Bearish Macro Conditions
Gold prices have remained resilient in the face of a rallying dollar and yields, despite traditionally bearish macroeconomic conditions. In Q3, gold bounced back from its 14% drop in Q2, gaining 6.4% on the quarter by September 25th, but losing 4% on the month, weakening momentum heading into Q4.
The precious metal spent much of Q3 trading between $4,000 and $4,500, with volatility compressed as investors were unsure whether to buy or sell due to fiat currency devaluation and rising US dollar and bond yields. However, central bank buying has been a significant source of support for gold, with the World Gold Council reporting 23 tonnes in July and year-to-date purchases totaling around 130t.
A potential deal to re-open the Strait of Hormuz could see central banks delay or pause rate hikes, potentially boosting gold prices. Additionally, if investors lose faith in the Fed's ability to control inflation or yields, a dollar debasement trade could resurface, benefiting gold and other haven assets.