Gold rebounds toward $4,450 on US policy uncertainty

Investing.com -- Gold rebounded toward $4,450 per ounce, driven by growing uncertainty around the US policy mix, according to BofA. The precious metal moved closely with EUR/USD as investors reassessed monetary policy, fiscal sustainability and exchange-rate management.

US-Japan intervention, viewed as a form of quantitative easing, reinforced this trend. Questions around Treasury-market support, FIMA usage and central-bank independence highlighted the increasingly complex interaction between rates, liquidity and government finances. Gold tends to benefit when policy signals become harder to interpret.

The US PCE report on August 26, the Jackson Hole gathering from August 27-29, and the September 16 FOMC meeting are the next key events. A dovish tilt would be bullish for gold.

Gold prices have averaged $4,360 per ounce year-to-date on a 7.3% year-over-year increase in investment demand. Scrap supply and fabrication demand have proven less price-sensitive than expected, with holders reluctant to sell gold and end-users willing to absorb higher prices.

BofA's model confirms that current investor buying is more consistent with a price closer to $4,000 per ounce than $5,000 per ounce, which is associated with investment demand growth of 21% year-over-year. Investor purchases likely need to accelerate for gold to push toward $5,000 per ounce.

Central bank purchases already provide a supportive backdrop, rising to 51 tons in June, well above the 12-month average of 27 tons. A sustained move higher in gold would also require a recovery in ETF inflows.

China's gold imports have posted a series of all-time highs year-to-date. China views gold as a strategic tool to support the internationalization of the yuan. By linking gold markets more closely to RMB-denominated trading, clearing and settlement, Beijing is gradually expanding alternatives to the dollar-centric financial system. HKPMCC represents an important step in that strategy.

The World Gold Council's Gold247 initiative aims to make bullion easier to transfer, trace and use as collateral while maintaining a direct link to physical metal.

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