Gold fell to a 20-month low amid sharp EM currency depreciation. At these levels, we believe the gold price may bounce back. Consumer demand is likely to be supportive in H2. And short positioning may quickly reverse should one of the many current macroeconomic risks materialise, increasing investment demand.

The gold price lost 3% in August, a downturn that was exacerbated by gold's fall below US$1,200/oz – an important technical support level – for the first time since early 2017. 

Gold was propelled down by the strength of the US dollar against both developed and emerging market currencies, particularly, a weakening of the Chinese yuan first and Turkish lira later. In fact, the dollar's strength has been one of the most important drivers of gold's performance this year as confrontational trade rhetoric and sanctions has so far played in favour of the US.  In addition, both the ECB and BOJ have delayed policy rate hikes, increasing differentials between interest rates in the US. 

But gold may rebound due to both technical and fundamental reasons: