Gold Falling Due To Market Misreading Monetary “Endgame” -- Analyst

KUALA LUMPUR, March 21 (Bernama) -- Gold prices are currently under pressure due to market liquidation, rising real yields and temporarily delayed physical demand, rather than a breakdown in the long-term macroeconomic outlook, according to an analyst.

SPI Asset Management managing partner Stephen Innes said gold is currently caught in a transition phase as investors misread the broader macroeconomic “endgame”, or the eventual shift towards monetary policy easing.

“We are not operating in a low-debt, high-flexibility world. We are operating in a balance-sheet-heavy system where tightening works quickly and breaks things quickly.

“The market is still clinging to the idea that central banks can hike with impunity, as if this system can absorb higher rates without consequence,” he said in a note today.

According to Innes, higher interest rates have intensified pressure across credit markets, equities and economic growth, particularly in a global financial system heavily reliant on debt and leverage.

“The longer rates stay restrictive, the more pressure builds in credit, equities and growth, and that is exactly the setup that eventually forces the pivot,” he said.

Innes said once monetary policy pivots and yields begin to decline, gold is expected to regain strength as investors return to the precious metal as a hedge against economic uncertainty.

“Gold is not failing. It is being liquidated in a market that is misreading the endgame,” he said.

Earlier today, Turkiye’s state-run news agency, Anadolu Agency, reported that the price of gold saw its biggest weekly drop since 1983, falling more than 10 per cent to below the US$4,500 (US$1=RM3.933) threshold on Friday.

“Hovering between US$4,477.50 and US$4,735.81 per ounce on Friday, the gold price is at US$4,509.08 as of 1940 GMT, down three per cent on a daily basis,” it added.

-- BERNAMA