Traditional Correlation in the Gold Market Breaks Down as Financial Giants Set New Targets
Precious metals, supported by strong central bank purchases, are demonstrating historical resilience despite high interest rate expectations.
As the U.S. Federal Reserve's interest rate decision is awaited, it is reported that long-standing rules in the gold market are stretching and the negative correlation between gold and real interest rates has broken down.
Interest Rate Expectations and Gold's Resilience
While markets focus on the U.S. Federal Reserve's interest rate decision, an unconventional picture is emerging in the gold market. Potential interest rate hikes are being priced into the markets with a high probability.
The Breakdown of Historical Correlation
According to assessments by JPMorgan analysts, the negative correlation between gold and real interest rates has largely broken down since 2022. Even during periods of positive real yields, gold is able to test new highs.
Intensive Central Bank Purchases
The biggest driving force behind the changing dynamics has been record purchases by central banks. According to World Gold Council data, the official sector continues its strong demand.
Price Targets of Financial Giants
Global financial giants have not revised their targets downward despite the possibility of interest rate hikes. Goldman Sachs, JPMorgan, Bank of America, and HSBC are making price forecasts at various levels.