Interest rates, residual factors, price momentum, geopolitical risk, economic expansion — if you can name it, it can probably influence gold prices.
A system created by the World Gold Council, dubbed the Gold Return Attribution Model (GRAM), can look back monthly and give investors insight into why gold prices moved the way they did, taking several factors into account.
Based on the latest release, which includes data through August, several key factors have led to gold’s price rise over the past six months.
What has changed?
One of the most notable items shown by GRAM that has morphed from a negative to a positive position over the six tracked months has obviously been the change in interest rates.
Many global banks are moving into economic easing cycles as fears about a downtrend mount. In June, interest rates went from being a negative to a positive and are likely to continue in that direction as the Federal Reserve is expected to make more cuts in the future.
On the flip side, the model shows that much of the momentum trading that drove the price higher in the earlier half of the year is beginning to show signs of fizzling out.
Though September’s GRAM data has yet to be released, it’s safe to assume geopolitical risks will help to offset some of the residual losses seen with the yellow metal.
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