Bullish reversal is imminent, gold price is expected to test 183
After the Fed's decision, the price of gold once set a new low this month, but then quickly rebounded to set a new high this month. Although the Fed has made a tough change in monetary policy, just like the Bank of England’s interest rate hike last night, the market has not reflected a tough monetary stance.
The decline in long-term growth expectations reflects the expectations of rising borrowing costs, while the decline in long-term yields has actually led to a decline in real yields. The declining real rate of return is creating an environment in which the price of gold can follow a seasonal trend to increase (in the past 5 years, December has been the second-best month of the year for gold prices).
Gold price volatility
Historically, unlike other asset classes, there is a positive correlation between gold prices and volatility. Although other asset classes such as bonds and stocks dislike increased volatility, which often means greater uncertainty in cash flow, dividends, coupon payments, etc., gold prices often benefit from periods of higher volatility. If the volatility of gold prices continues to decline, the rise in gold prices may be temporary.
The decline in long-term growth expectations reflects the expectations of rising borrowing costs, while the decline in long-term yields has actually led to a decline in real yields. The declining real rate of return is creating an environment in which the price of gold can follow a seasonal trend to increase (in the past 5 years, December has been the second-best month of the year for gold prices).
Gold price volatility
Historically, unlike other asset classes, there is a positive correlation between gold prices and volatility. Although other asset classes such as bonds and stocks dislike increased volatility, which often means greater uncertainty in cash flow, dividends, coupon payments, etc., gold prices often benefit from periods of higher volatility. If the volatility of gold prices continues to decline, the rise in gold prices may be temporary.
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