Once more a safe haven
According to Teves, markets will be keen to hear the Fed’s current outlook. “A cautious message which increases the likelihood of policy relief would help gold’s journey north, while we think any attempt to keep March on the table could trigger a near-term correction in gold.”
Inherent within Teves’ comment is the role of central banks, and this is where things get a little murkier and, perhaps, where those with an even more optimistic view of gold might put up their hand.
An important difference, between 2015 and now, is that gold once again seems to be being spoken of as a safe haven.
As BullionVault’s head of research, Adrian Ash, put it in a recent note: Simply put, gold tends to do well when other assets do badly.
To take it further, using Ash’s words again: “Historically gold tends to do well when other investments fall hard, but it does best of all when people lose confidence in central banks…2016 has started with a real bang as the realization dawns that policymakers are not in control.”
The changing view of central banks
There is subtle point of difference here that is worth noting. In the traditional view of gold as a safe haven, investors flock to the metal when they fear that the value of their capital could be at risk. In the current expression, it is less a fear that value is at risk and more a worry that the efficacy of central banks to do “whatever it takes” is diminishing.
Teves expresses the point slightly differently. She agrees that gold is benefitting from safe haven demand, as the market faces three key risks: uncertainty in China, depressed oil prices and Fed tightening amid declining inflation expectations and tightening financial conditions.
But, she adds: “Many investors have been unengaged in recent years, noting that it was more attractive to express macro views in other asset classes – this seems to be slowly changing and macro players are slowly getting involved again.”