Is the gold rally over?

The nearly 3% drop in the price of gold over the past month has led us to believe that the yellow metal rally is over.

A stronger US dollar, optimism sparked by US-Chinese trade negotiations and rising stock markets have combined to bring down safe haven badets from a record high for 11 months.

Its drop of just over $ 1,340 troy ounce resulted in a decline in the amount of physical gold in exchange traded funds, which went from 73, 3 million to 71.8 million tons at the end of January.

The money invested by investors in the ETFs has contributed to the 14% rise in the price of gold since its last trough in August, of $ 1,173 an ounce, while the markets were up. Worried more and more about the health of the world economy and were disrupted by huge fluctuations in equities. markets.

Although these concerns have subsided, badysts believe that there are still reasons to remain optimistic for gold. According to Goldman Sachs, a combination of the US Federal Reserve that is pausing in its series of interest rate hikes and stronger growth in emerging markets will lead to a weakening of the US dollar, which should support the price of gold .

The Fed's decision makers began Tuesday their last meeting on monetary policy. Traders are not currently expecting any interest rate hikes this year. Some even suspect that the central bank could lower its rates until the end of 2019.

The slowing of the European economy and the decision of the European Central Bank to postpone the possibility of a rise in interest rates are so many reasons why the yellow metal should remain popular with investors. the region, where gold holdings of the ETF have increased over the last three years. WE.

"Given the backwardness of the ECB's rise and the modest choice of growth in the euro area, we expect real 10-year German yields to remain negative in the near term," said Mikhail Sprogis, badyst at Goldman Sachs. . "Therefore, we think that the construction of European ETFs can continue to exceed the United States."