Lower than expected inflation in the US is putting downward pressure on the USD. This, along with lower real yields, is allowing gold to retest $1,800, economists at ANZ Bank report.

Strategic buying of Gold ETFs has not emerged

“Retreating US inflation triggered a US Dollar sell-off, which in turn supported the Gold price. US benchmark real yields are also levelling-off from a recent high, narrowing opportunity costs. That said, inflation is hovering well above the Federal Reserve’s target of 2%, leaving little hope of the Fed turning dovish anytime soon.” 

“Short covering of investor positions has been driving the Gold price, but strategic positioning of ETF holdings has not been strong.”

“Physical demand is weakening as seen in the spot premium’s retreat from October, but official purchases are holding up.”