Joe Foster, strategist and portfolio manager, and Imaru Casanova, the deputy portfolio manager for VanEck’s gold strategy, said in their most recent comments that they anticipate gold prices to remain at present levels despite the U.S. currency regaining strength.
The experts also said that any U.S. dollar weakening could help gold as investors continue to seek for safe-haven investments in an uncertain environment.
The Federal Reserve’s hawkish monetary policy stance and rising interest rates continue to support the U.S. dollar. Foster and Casanova said that the rate hikes may soon come to a stop because of the tightening cycle.
“As the economy weakens, we do think the Fed will have to stop raising rates, but we also think there is a big chance that inflation will stay high for a lot longer than expected. Real rates would remain negative as a result, supporting greater gold prices,” the analysts said.
Markets expect either a 50 basis point increase or a 75 basis point increase in interest rates from the Federal Reserve in September, according to the CME Fed Watch Tool. Markets anticipate a slower rate of rate increases as the year draws to a close.
“Markets continue to be split on whether or not this policy would rein in inflation or cause the economy to enter a recession. Some participants think the US economy is already in a recession, while others think inflation will start to decline. Both scenarios seem to favor an earlier than anticipated conclusion to the Fed’s tightening cycle, which we regard as a powerful trigger for the price of gold.”
VanEck added that despite the possibility that gold prices, which are now hovering around $1,800 an ounce, are in a neutral phase, there are still possibilities in the precious metals market. According to the experts, this industry is well-positioned to deal with growing inflation and input costs.
“In a situation of low gold prices, royalty and streaming firms function as a defensive investment vehicle alongside cash and gold bullion. Exposure to these businesses may also provide protection against price inflation,” analysts said.
According to the study, the VanEck gold fund now owns Franco Nevada, which accounts for 9.23% of its portfolio, Wheaton Precious Metal, which accounts for 4.91%, Royal Gold, which accounts for 2.1%, and Osisko Gold Royalties, which accounts for 1.56%.