Gold has shaken off this week’s negative China news to settle at two week highs, a sign that gold is proving resilient in economic headwinds.
Futures settled slightly higher in trading overnight, up 0.1 percent to $1,413.50 ($A2,007.20) an ounce — while silver also had a good day, finishing nearly a percentage point higher to $15.36 an ounce.
Analysts put the continued strength of gold futures down to ongoing interest rate chatter out of the US.
“The gold price is still trading near the highest level in nearly six years and I do not think that the trend isn’t going to change anytime soon because the Fed has once again adopted the loose monetary policy,” chief market analyst at TF Global Markets, Naeem Aslam, was quoted by Dow Jones as saying.
“The Fed is under pressure to cut the interest rate this year in order to support inflation and this means [a] weaker dollar.”
Investors can expect more action out of the US this week, with the Fed’s ‘Beige Book’ — a periodic look at the US economy, set to be released Thursday Australian time.
Several Fed officials are set to speak this week as well, in speeches that will be watched very closely by traders.
The recent momentum for gold has been driven by the prospect of rate cuts in the US and Europe, with gold seen as a ‘safe haven’ metal for investors.
A lower US interest rate would mean ‘safer’ investment options such as bonds and savings accounts would offer less yield, while it would also be seen as a sign that the US economy is faltering.
That would drive the US dollar lower, which would also make gold a more attractive store of value.
Speculation around interest rates has driven much of the sentiment in the space, and that’s been a boon for companies such as Great Southern Mining (ASX:GSN).
Great Southern Mining is actively exploring for both gold and silver in WA and Queensland, and therefore has exposure to both metals at a time when the Australian price has largely followed the US’ lead.
This content is produced by Star Investing in commercial partnership with Great Southern Mining. This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
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