LTPZ - Gold: Unwinding Rate Cut Bets Leave Gold Exposed As Speculative Interest Peaks

2024-02-22 23:46:46 ET

Summary

• Gold clings to $2,000 despite unwinding interest rate expectations, but high rates will undermine gold's performance relative to cash and bonds.
• Inflation-linked bond yields suggest gold's fair value is as low as $1,000.
• Gold's resilience may reflect speculative buying as shown in non-commercial futures and options volatility, but this has begun to fade and may drag down gold with it.

Since my last article on December 11 gold has managed to cling on to the $2,000 even as interest rate markets have unwound much of their expectations about monetary easing. The narrative is that central bank buying is allowing gold to shrug off higher rates, but even if gold manages to avoid a large correction, persistently high rates will undermine gold's performance relative to cash and bonds....

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