Gold remains undervalued as markets continue to price it in the second half of 2023 – Quant Insight

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(Kitco News) – Despite a strong start in August, He went The market struggled to find any consistent upward momentum as prices remained below $1,750 an ounce.

Market expectations for more aggressive monetary policy measures by the Federal Reserve continue to support the US dollar, which is putting pressure on He went; However, one market analyst said that bullish momentum is accumulating in the precious metal.

In an interview with Kitco News, Huw Roberts, head of analytics at Quant Insight, said that according to his company’s research, the precious metal entered a macro system and broke below fair value levels.

According to Quant Insight, with interest rates rising and the US dollar, He went Prices should be trading around $1,760 an ounce. despite He went About 2% below its fair value, Roberts said traders may wait for a better entry point.

He added that gold has room to fall as the Federal Reserve continues to raise interest rates throughout the year.

“You can’t argue that the Fed has been consistent throughout 2022 that inflation has become their number one priority and the fight against inflation they need to tighten financial conditions,” he said.

Although gold presents a challenging environment, Roberts said there is still potential for this precious metal. He explained that in July, markets prematurely started expecting the US central bank to focus on its aggressive monetary policy. But hawkish comments from Powell dashed that expectation. Markets see a 76% chance of a move of 75 basis points later this month.

“Gold investors have gotten excited about the protectionist trend, and those expectations haven’t gone away; they have just been pushed back to the second half of 2023,” he said.

Although the market currently believes in the Federal Reserve’s aggressive stance on inflation, Roberts indicated that a lot could happen in the next six months.

“Given the current macro fundamentals, in the current environment, gold is undervalued, but it can still get cheaper. Our models tell us that investors may want to wait for a better entry point,” he said.

In terms of what drives the overall outlook for gold, in July, inflation was the most important factor moving the precious metal. However, this month’s analysis from QI shows that the market is more balanced between inflation, currency valuation and corporate credit spreads.

In an attempt to explain the data, Roberts said tighter financial conditions are driving corporate debt higher, indicating rising economic uncertainty. The higher spreads are showing the growing fear that the US economy is heading into a recession.

“It feels like last month, a perfect picture of He went appeared. It’s an inflation hedge and a risk hedge, Roberts said. If you were looking for a safe haven, what would you buy? You cannot buy treasures due to inflation. You can’t buy coins because of the King Dollar, so He went It becomes a logical choice.”

Disclaimer: The opinions expressed in this article are those of the author and may not reflect the views of Kitco Metals Inc. The author has made every effort to ensure the accuracy of the information provided; However, Kitco Metals Inc. cannot. Nor does the author guarantee this accuracy. This article is for informational purposes only. It is not a solicitation to conduct any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. does not accept The author of this article will be liable for losses and/or damages arising from the use of this publication.

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