Lagos — Gold prices rose on Tuesday, as lingering concerns over US fiscal health and broader macro risks continued to offer support. After last week’s downgrade of the US credit rating by Moody’s, which cited rising debt levels and an elevated cost, investors are reassessing the long-term outlook for US sovereign risk. As such, safe-haven assets like gold could experience heightened demand.
However, the short-term upside could be limited if ETF outflows continue. Gold ETFs experienced a sharp outflow of 30 tonnes last week, which could lead this month’s flows to contrast with the strong increase in April. In parallel, persistent central bank buying and efforts to diversify away from dollar-denominated assets continue to anchor gold’s long-term appeal.
While markets still anticipate rate cuts in the second half of the year, recent hawkish commentary has injected caution into that narrative. Any shift in tone could impact the medium-term outlook for non-yielding assets like gold.
Geopolitical developments add to the complexity. Hopes of immediate ceasefire talks between Russia and Ukraine lifted investor sentiment. However, any setback could quickly revive risk aversion and renew demand for the precious metal.”
* Analysis by Quasar Elizundia, Expert Research Strategist – Pepperstone
