Gold's Next Move Hinges on Dollar, Yields, and Investment Demand

Gold's recent surge to record territory has been followed by a steep correction due to a stronger US dollar and shifting rate expectations. However, August saw another sharp rebound, with gold testing the $4,500-an-ounce area. This recovery comes amidst an increasingly complex macro backdrop, with investors weighing the outlook for US interest rates and real yields alongside renewed concerns over government debt, fiscal policy, and the Treasury's expanded long-dated bond buybacks.

The key question is whether this rebound can develop into a sustainable breakout or if a stronger dollar and renewed monetary tightening could trigger another pullback. In an interview with Invezz, Rick Kanda, Managing Director at The Gold Bullion Company, discussed what gold needs to break convincingly above $4,500.

Kanda believes that falling or stabilizing real yields, a weaker US dollar, and strong investment demand are necessary for gold to break sustainably above $4,500. He also pointed out that concerns around fiscal policy and debt will support gold, particularly with recent announcements about the Treasury buybacks causing concern among policymakers.

The interview highlighted the importance of central-bank and ETF demand in supporting gold prices. Kanda noted that while the Treasury buybacks are an important factor, they are not the fundamental reason for gold's rally. He attributed the move to a combination of factors, including concerns around US debt, a weaker dollar, geopolitical uncertainty, and central-bank demand.