The gold market is finally benefitting from the rising inflation risk, defying recent strength in the US dollar. Strategists at ANZ Bank expect the yellow metal to continue enjoying upward momentum as lower real interest rates are lingering.

Strong risk appetite to fade

“The Fed’s announcement for the start of asset purchases has been dampened by signals of delay in rate hikes. This means that negative interest rates stay longer than expected, it would favour gold investment.”

“We believe the pace of investment in risky assets will slow amid growing ‘stagflation’ risk and consequent central bank policy changes.”

“ETF holdings of gold show net disinvestment, though investors have added some long positions in futures. Demand for physical gold is encouraging, with China imports averaging 25t against less than 10t last year. The premium for physical gold recovered in both in China and India.”