By Chris Weston, Head of Research at Pepperstone
The market has pushed gold to all-time highs for a reason, and while the exact reason could fall on any one of many macro debates and concerns being posed by market players, the fact that gold is uncorrelated from the S&P500 and US Treasuries and is a portfolio hedge that is working well makes the investment case highly attractive. The fact that gold has been so strong, the pullbacks limited, and contained, and the rate of change has picked up also brings in a lot of systematic buyers, and we can’t dismiss the importance of the flow-based effects pushing gold higher. Of course, the FOMC meeting does pose risk to gold positioning, but the risk to US growth is skewed to the downside, and the market is sensing a growing risk that the Fed has miscalculated its views on economics and are progressively behind the curve on policy – A Fed that may be forced to take rates towards a neutral setting far more urgently again puts gold as a great place to be invested and would subsequently benefit from any rise in concerns that the Fed may have left rate cuts a little too late.