Geopolitical and economic risks are easing and with them the price of gold, say Goldman Sachs, in a recently published note to clients.
“Looking ahead, we expect that gold will come under pressure this week, and over the next three months, with a near-term target of $1,200/oz. In fact, this week is likely to see some significant bearish catalysts materialise in our base case,” said Goldman’s Max Layton.
Gold is an international safe-haven par excellence, so it tends to outperform when there is a crisis, however, the success of Emmanuelle Macron in the first round of the French Presidential election has eased fears that France could leave the EU, leading to pullback in gold.
There is arguably an even stronger relationship between gold and US interest rates – or ‘real rates’ to be specific – which are interest rates minus inflation.
The relationship is inverted – so rising interest rates tend to be accompanied by falling gold prices and vice versa.
The Federal Reserve (Fed) set interest rates so their influencers are also influencers of gold.
A federal tax cut announcement expected on Wednesday, April 26 could influence the timing of the next interest rate hike by the Fed and therefore the price of gold.