August’s seasonal strength in gold might be influenced by some specific events this month, including US election developments, the Jackson Hole Symposium and Nvidia’s earnings call, even as the current equity rout is playing out in favour of gold, according to World Gold Council (WGC).
In its gold market commentary released on Thursday, WGC said, “Our take is that these events will keep uncertainty high rather than providing any definitive resolution. The gold market might also get some support from Indian buying following the recent duty cut.
WGC said in its report that August has typically been kind to gold, aided by weakness in bond yields. But seasonal tailwinds are up against powerful cross currents:
Jacson Hole -The market positioning is turning increasingly dovish following recent weak US data prints. However, the one-sided bet on cuts leaves some room for disappointment, given a still healthy economy and the Fed’s historical reticence ahead of elections. This could translate to a downside risk for gold should the Fed language not deliver as the market expects.
The US politics and the Democratic National Congress: Polls have shifted dramatically with the Republican poll lead almost eviscerated. But both parties’ policies are likely gold friendly.Market volatility: A market sell-off initiated by Q2 earnings disappointments from US tech leaders might accelerate in late August when Nvidia, the AI darling, reports. Gold could continue to benefit, as it has thus far.Finally, the equity market volatility experienced in early August following a tech sell off in July may linger until Nvidia reports at the end of the month. It caps a poorly received Q2 for the sector responsible for the bulk of US equity gains this year. To boot, volumes tend to be lower in August which could exacerbate market moves. For gold, elevated uncertainty and event risk is likely to keep interest from investors high. So far, it has done a good job in protecting portfolios