Safe haven role reassessed on rate repricing – BNY

Finance

Safe haven role reassessed on rate repricing – BNY

BNYs Head of Markets Macro Strategy Bob Savage reports that Gold is set for its first weekly loss in five weeks as rate expectations shift toward hikes in Europe and fewer cuts from the FOMC. A stronger Dollar and use of Gold as a liquidity source weigh on prices. Changing Oil–Gold ratios highlight evolving risk barometers around upcoming U.S. jobs data.

Losing ground as liquidity tool

“Gold prices are on track for their first loss in five weeks, as interest rate expectations shift, pricing in hikes for Europe and just one cut for the FOMC.”

“The USD rally – the dollar has gained 1.7% this week, its strongest performance in over a year – reflect the rethinking of safe havens.”

“Gold has also served as a liquidity tool, as investors have sold holdings to cover margin or increase cash holdings.”

“The relationship of oil to gold has shifted: whereas it took nearly 80 barrels to pay for 1 oz of gold, that figure now stands at 60 barrels.”

“The roles of rates, liquidity and gold as risk barometers will be back in play after the U.S. jobs report if it surprises to the upside or the downside.”