Real Yields and Gold Prices: What to Expect in Q2 2023

Gold price forecast 2023: As we move into the second quarter of 2023, the price of gold is gaining momentum due to the ongoing global banking crisis and uncertainty surrounding the Federal Reserve. Gold is considered a safe-haven asset during times of financial market fears, and this has led to an increase in demand for the precious metal. The GVZ chart, which measures the market’s expected 30-day price movement in the largest physically backed gold exchange traded fund (ETF) in the world, has also indicated increased volatility.

The SPDR Gold Trust (GLD) has seen steady growth in trading volumes in March, further supporting the recent upward trend. However, it remains to be seen whether this trend will continue throughout Q2.

Federal Reserve and Gold Prices

In March, the Federal Open Market Committee (FOMC) raised interest rates by 25 basis points to 5% due to elevated inflationary pressures and a tight labor market environment. The updated Fed dot plot indicates that interest rates have peaked at 5%, but the Fed is faced with a tough decision to control inflation, which remains relatively high despite a robust US economy.

Real yields impact on gold

Real yields, which are the most significant variable affecting gold prices, have remained constrained between 1% – 1.75% since late 2022. However, with the recent forward guidance from the Fed, real yields may track lower throughout Q2, which could potentially drive gold prices higher.

Conclusion

The potential for higher gold prices in Q2 is more likely, particularly if inflation data indicates a decline during the ongoing US central bank hiking cycle. Economic data points will be critical in determining the direction of the market, resulting in a possible range-bound move until more clarity is obtained.

Spread the love

Neal Bhai has been involved in the Bullion and Metals markets since 1998 – he has experience in many areas of the market from researching to trading and has worked in Delhi, India. Mobile No. - 9899900589 and 9582247600

Leave a Comment