Gold Prices May Have Passed Their Most Difficult Period

Gold prices may have passed their most difficult period according to BCA Research, an independent investment research organization. The organization's report 'Gold's Selloff Is Getting Long In The Tooth' suggests that the gold price drop is approaching its final stage.

The two main factors affecting the market are US real yields and the strength of the USD. According to BCA Research, most of the negative impact from opportunity costs has been reflected in the price. When real yields increase, holding gold becomes less attractive because the precious metal does not generate periodic cash flow.

BCA Research notes that gold's value is more closely tied to real yields than inflation rates. The organization believes that the Fed's next interest rate hikes have largely been reflected by the market, and therefore gold prices may be supported as the opportunity cost of holding non-performing assets no longer continues to increase.

Central bank buying activity has also created a foundation for the market, helping gold prices maintain at a higher level than in previous periods. However, BCA Research assesses that the buying rate of the official sector may have passed its peak period.