The fundamental question for gold investors is, if monetary policy is about to shift from tightening (higher rates) to neutral (steady rates), should this be positive for gold? If we look at the historical performance of gold and major assets during past hiking cycles as well as during periods when policy has transitioned from tightening to neutral and, eventually, easing. How do gold prices get impacted after the central bank shifts its stance from hawkish to neutral? The immediate average effects (one to three months) of a transition in policy from tightening to neutral on gold are not clear cut. However, it is normally positive for the gold prices as has been seen in intermittent rallies in the price of gold.

However, at this point of time there are still few X-factors which could be keep the gold traders tentative as of now. Here are some of the key factors.

· There is still lurking uncertainty over whether hiking might resume once again or not or whether the policy has shifted to neutral for good

· Falling inflation or lower risk of rising inflation – generally seen as bad for gold

· Shift in investor allocation to safe fixed income (government bonds, cash) from riskier assets, in lieu of allocations to gold

· An uncertain dollar trajectory: rates argument for dollar likely weaker, but safe-haven argument building.

· Gold generally outperformed stocks and the broad commodities complex during the volatile periods. It also outperformed US government and corporate bonds in the more recent post-tightening cycle – coinciding with the 2008-2009 financial crisis – and this was most likely as a result of more widespread systemic risks