Gold buyers bet against US rate hikes curbing inflation amid persisting Russia-Ukraine conflict

Gold buyers bet against US rate hikes curbing inflation amid persisting Russia-Ukraine conflict

Gold is proving remarkably resilient, gaining almost 7 per cent this year as investors shrug off surging real yields and strengthening US dollar to focus on political and economic risks. While traditional yield and currency drivers suggest bullion is overvalued, demand for the haven asset remains strong. That's because gold buyers piling into exchange-traded funds are taking a pessimistic view of the U.S. Federal Reserve's ability to cool decades-high inflation without hurting the economy. For them, gold is a hedge against soaring prices and low growth. "Gold has effectively been questioning the Fed's ability to raise actual real rates, while delivering a soft landing for the economy," said Marcus Garvey, head of metals strategy at Macquarie Group Ltd. "You could argue gold has very heavily priced the Fed not being successful." Increasing geopolitical uncertainty following Russia's invasion of Ukraine is also driving strategic portfolio diversification by investors who are less concerned about higher real rates, according to Joni Teves, an analyst at UBS Group AG. The global economic outlook remains murky as a robust recovery from the pandemic is tempered by the conflict in Ukraine and China's continuing battle against COVID-19. Any escalation in the conflict, which is already weighing