Breaking down gold price action: this is what institutional investors react to - LBMA

Gold is being pulled in different directions by opposing drivers, creating a confusing environment for investors, according to the LBMA/LPPM Global Precious Metals Conference 2022.

Persistently high inflation is mixed in with continued dollar strength and strong gold ETF outflows. On top of this, there is very robust physical demand. But it won't be until markets see a pivot from the Federal Reserve that gold might have room to move higher.

Rhona O'Connell, head of market analysis of EMEA and Asia Regions at StoneX, James Steel, chief precious metals analyst at HSBC Securities, and Suki Cooper, executive director of precious metals research at Standard Chartered, summarized the highlights from the conference in their wrap-up webinar Thursday.

In the current market environment, gold's institutional investors are not reacting directly to the latest inflation numbers or future inflation expectations, said Steel.

"Gold institutional investors don't react so much to the latest inflation data. They react to the anticipated monetary response to that data. And right now, it's tightening," Steel described. "And this was a theme right throughout the conference — the Fed and other central banks continue to tighten, which is lending support to the dollar, and as a consequence, one can't expect gold to do much better. It has done relatively well, particularly in non-dollar currencies."