Barclays maintains medium-term bullish outlook for gold: Three key supports stand out

Gold, monitored as a safe haven in global markets, is showing signs of recovery following recent volatility, while Barclays has maintained its medium-term optimistic view on the precious metal. In its assessment, the bank stated that gold prices are undergoing a process of “repricing and stabilization.”

Spot gold rose 3.2 percent the previous day to reach $4,375, marking its highest level since June 9. Despite this, prices remain more than 20 percent below the record level of $5,589 recorded at the beginning of the year.

According to Barclays, it is too early to say that the pressures on gold have completely disappeared in the short term. While rising interest rate expectations during the war process have led investors to turn to yield-generating instruments such as bonds, gold's role as a safe haven has also been re-debated in the markets.

THREE FACTORS SUPPORTING GOLD

The bank bases its medium-term bullish expectation on three main reasons: the risk of high inflation becoming persistent, global political uncertainties, and the tendency of central banks to diversify their reserves. Barclays analysts believe that, in particular, central bank demand for gold will continue to provide strong support to the market.

The report predicted that markets could refocus on economic data following a potential peace agreement between Washington and Tehran, which has been discussed as a possibility this week. It was assessed that energy-related cost increases keep inflationary pressure alive, which is a supporting factor for gold.

According to studies cited by Barclays, every 1 percent increase in consumer inflation in the US can be associated with an approximately 5 percent rise in gold prices. For this reason, the inflation outlook is expected to be one of the critical indicators for the direction of gold in the coming period.

Volatility in gold prices has also affected mining companies. While the retreat seen in the precious metal during the war period pressured revenues, supply constraints in oil and natural gas markets increased production costs. Although gold mining stocks can perform strongly during commodity price rallies, they are among the assets with high volatility that can experience sharper losses during downturns.

In its sector assessment, Barclays announced that it finds Endeavour Mining and Hochschild shares more attractive than Fresnillo, which is trading at high valuations. The bank also maintained its “overweight” recommendation for Newmont Mining and Agnico Eagle Mines in its global portfolios.

However, the bank also emphasized that it does not expect a strong recovery in the short term due to weakening investor confidence. According to analysts, the direction of gold will largely depend on capital inflows from investment funds and the course of macroeconomic risks.