Investors are still buying dips in the gold price

Investors are still buying dips in the gold price. Investor expect this to continue for the next two weeks. As for seasonal jewellery demand, we expect it to remain robust until the first week of November.

We maintain the gold price at $1,350 is consistent with quantitative easing by the Fed of $500bn. Anything less may see the gold price lower. Empirically, we find the long-term causal drivers of gold are global liquidity and real interest rates. Lately, gold has diverged by some margin from the long-term trend provided by these causal drivers. Divergence by gold from this longterm trend is not unusual, but the speed, size and timing of its divergence coincide with the increasing expectations for further QE.

We find that for global liquidity to be consistent with the current gold price around $1,350, the Fed would have to expand its balance sheet by $500bn.

Gold support is at $1,331 and $1,322. Resistance is at $1,346 and $1,352.

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