Gold loses upside potential as it nears all-time high

Following Fed Chairman Powell’s speech on Friday, Gold once again rose above the $2,500 per troy ounce mark. Supported by the deteriorating situation in the Middle East over the weekend, the price on Monday was close to the all-time high set last week. At the Jackson Hole symposium, Powell had said that it was time to adjust policy, Commerzbank’s commodity strategist Carsten Fritsch notes.

Gold has no significant upside potential

“The timing and pace of rate cuts would depend on incoming data. As a result, the USD depreciated and bond yields fell, both of which were positive for Gold. Expectations for rate cuts have also risen slightly. Currently, Fed fund futures are pricing in a rate cut of around 35 basis points in September and rate cuts of just over 100 basis points at the remaining three meetings through the end of the year.”

“The prospect of falling interest rates is also attracting investors. According to Bloomberg, Gold ETF holdings rose by 15 tonnes last week to the highest level in six months. Speculative interest is particularly strong. The net long position of speculative investors rose to around 193,000 contracts in the week to August 20th, at the same time as Gold hit an all-time high, its highest level in almost four and a half years.”

“Much of the positive news for Gold may therefore already have been priced in. We feel vindicated in our view that Gold has no significant upside potential for the time being. We see more room for the three other precious metals that have not caught up with Gold in recent weeks.”