Tightness in the labour market and strong economic data are likely to keep the Fed hiking rates. This leaves a risk of pushing real rates higher in the short-term. And Gold is likely to underperform in such an environment.

Nevertheless, we hold our positive view for the medium term, as structural drivers remain intact. The ongoing decline in inflation will ultimately see the Fed pause its interest rate cycle at some point this year. Normally US yield start retreating at this point, reducing the opportunity cost for Gold investing.

A pause in rate hikes by the Fed amid other more hawkish central banks should see the US Dollar likely to weaken in the second half of this year. Further, the risk of a US recession is not completely off the table, which should attract haven fund flows into Gold into 2024.