Gold has faded from the rates

Against the backdrop of the Fed’s plans to continue aggressive tightening of monetary policy, global investors have reduced interest in gold. The cost of metal on the world market has updated a one and a half year low, approaching $1.65 thousand per ounce. On the Russian market, the price fell below 3.2 thousand rubles. for 1 year. At the same time, Russian investors are showing less and less demand for metal as an alternative to foreign currency investments against the backdrop of falling prices and growing competition from bonds denominated in yuan.

Last week, the price of gold updated a one and a half year low. So, on September 16, according to Investing.com, quotes fell to $1654.56 per troy ounce, the lowest value since April 9, 2020. As a result of trading, the price rose to $1,675.45 per ounce, having lost more than 7% over the month.

Pressure on gold is exerted by expectations regarding the Fed’s policy. After harsh statements by the head of the American regulator, Jerome Powell, at a symposium in Jackson Hole at the end of August (see Kommersant on August 29), market participants are cautious about the upcoming meeting, which will take place on September 21. “In the absence of comments from the Fed and against the backdrop of mixed macro statistics, investors assume that the rate can be raised by 100 basis points (now 2.25-2.5%.— “b”). We expect the regulator to raise the rate by 75 basis points next week and give tough forecasts for further movement,” said Mikhail Sheibe, commodities strategist at SberCIB Investment Research.

In such conditions, international investors are actively reducing investments in gold. According to Bloomberg, the total assets of exchange-traded funds fell last week to a minimum since the beginning of the year – 3.08 thousand tons. For five weeks of steady decline, they have decreased by more than 56 tons.

“In the fourth quarter, gold is likely to average $1,680 an ounce if the Fed raises rates by 75 basis points. Otherwise, we can consolidate lower and test the level of $1,600 per ounce at the moment,” Mikhail Sheibe believes.

The cost of gold is also falling on the Moscow Exchange. During the auction on September 16, it reached 3.21 thousand rubles. per 1 g, and at the end of the day it stopped at around 3.22 thousand rubles, which is 3% lower than the value of a week ago and almost 7% lower than a month ago. The trading volume on Friday amounted to 115 million rubles, 2.7 times lower than the average value for the previous month.

At the same time, despite the decline in demand for the metal, the number of brokers that provide clients with access to exchange trading in gold is expanding. In early September, BCS (0.89 million customers) entered the exchange market of precious metals. “Several thousand clients showed interest in the instrument, the average volume of transactions exceeded 100 thousand rubles,” said Anatoly Klim, an analyst at BCS World of Investments.

In addition, Russian investors continue to buy shares of investment funds investing in the metal, although here, too, one can see a decrease in the inflow of funds. According to Kommersant’s estimate, based on Investfunds data, since the beginning of the month they have invested 150 million rubles in such mutual funds, which is ten times less than investments in August.

“The decline in demand from Russian private investors for gold is primarily due to a decrease in the price of the precious metal as the dollar strengthens due to higher interest rates in the US,” said Sergey Suverov, strategist at Arikacapital. According to Investing.com, the DXY index (the dollar against six leading currencies) is near the 110 mark, up 3% from a month ago and 15% higher than the start of the year.

At the same time, Russian investors’ funds are being redistributed into assets denominated in yuan, including bonds. In two months, they were placed by four issuers for almost 26 billion CNY, more than half of which fell on the issue of Rosneft.

At the same time, market participants do not expect active sales of gold by investors, as the risks of storing “toxic” dollars and euros remain. Growth in demand for gold will be facilitated by purchases of the metal by world Central Banks to diversify reserves, especially from China and India, believes Dmitry Skryabin, portfolio manager at Alfa Capital Management Company, which is still characterized by an extremely low share of gold reserves – less than 5–6% .

Vitaly Gaidaev