VIEW: ANZ: Going For Gold

ANZ note that "gold hit a record high this week amid a surge in investor demand. Strong safe haven demand, falling yields, rising inflation expectations and a weak USD have all contributed to this move. However, further gains are reliant on investor demand, with consumer demand showing no signs of recovery. As optimism of a swift recovery in the global economy has evaporated amid outbreaks in coronavirus cases, demand for safe haven assets has returned. The flow-on impact has been that bond yields have continued to fall. But a slump in the USD in recent weeks ignited investor demand. It's not all positive, with physical demand remaining weak. Consumer demand in India and China are down 55% and 48% respectively in H1. As a result, the physical market is in a surplus of 1,397t in 2020. Gold will be entirely reliant on investor demand plugging the gap for prices to push higher. There is no doubt that the backdrop remains highly constructive, with negative real yields for the foreseeable future. We have subsequently revised up our 6–12-month target to USD2,300/oz. Even so, we are mindful that if economic sentiment improves in coming quarters, the hurdle for continued growth in investor demand may make the path to this level an arduous one."