Gold retreats from four-month high as Central Banks shift policy

Pressure mounting on bitcoin suggestS that investors could be channeling funds into other assets like gold


Gold prices on Thursday slid from the four-month high of $1,912.76 per ounce attributed to a confluence of factors on the global stage, key among them recent policy indications by the U.S and New Zealand Central Banks.

In the U.S, the Federal Reserve has indicated plans to reduce its massive bond purchases if the economy continues on recovery path post-pandemic slump. Meanwhile, New Zealand, like Canada, on Wednesday hinted that it may start to raise interest rates in the second half of 2022 as Central Banks start to shift stance from their COVID-induced emergency monetary settings.

Gold retreated by 1% to $1,892.08 as of Thursday 11:20 am, data provided by Metals Daily show.

In response to the U.S Federal Reserve’s plans to tighten screws on monetary policy, the Dollar firmed on Thursday, further exerting downward pressure on bullion.

In my view, gold prices will trade largely in the region of $1,800 to $2,000 per ounce in the second half of the year as inflationary pressures mount in the U.S, though the Federal Reserve has termed it “transitory”.

In addition, the pressure mounting on bitcoin suggests that investors could be channeling funds into other assets like gold. Bitcoin came under pressure from more than just Musk’s comments on its energy usage. The Chinese government has also cracked down on the crypto ecosystem, banning financial institutions from providing services related to digital assets.

As of Thursday morning, Bitcoin was down more than 40% from its all-time high of $64,000 set in mid-April to a region between $30,000-$40,000.

At the beginning of this year, analysts at the London Bullion Market Association’s (LBMA) annual precious metals forecast competition predicted that gold will average $2,000 or more across 2021.

According to GlobalData, overall gold production is expected to increase by 5.5% this year to 113.9 million ounces and to 124.1 million ounces by 2024 – a 2.9% compound annual growth rate (CAGR).

In Zimbabwe, gold deliveries to Fidelity for the month of April 2021 fell by 5% to 1.58 tonnes from 1.46 tonnes in March.

Cumulative gold deliveries for the first four months of the year fell 25% to reach 5.36 tonnes from 7.18 tonnes during the January to April period in 2020.

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