US Federal Reserve chairman Jerome Powell has given the strongest indication yet that the bank would move to cut rates sooner rather than later — and that’s good news for gold.
“The bottom line for me is the uncertainties around global growth and trade continue to weigh on the outlook,” Powell told the House Financial Services Committee, according to the Wall Street Journal.
He noted that inflation data was softer than expected, and this was driving the bank’s sentiment.
Stocks rose and bond yields fell on his remarks on strengthening expectations of a Fed rate cut — and gold jumped as well in US trading overnight.
Generally speaking, a lower interest rate spurs moves towards safe-haven investments such as gold — as investors see the cutting of rates as a fundamental weakness in the economy.
Together with the prospect of rate cuts in Europe and general geopolitical instability, gold has been on somewhat of a tear over the last few months.
With investors in futures markets betting that the US Fed will cut by 25 basis points at the next opportunity, we could see gold get a bit more support.
While the rising gold price offers opportunities for gold traders, it also gives support to a slew of ASX-listed gold mining companies — whether they’re exploration companies or production companies.
For example, Great Southern Mining (ASX:GSN) currently holds ground in northern Queensland and the eastern part of Western Australia.
While it started the year at 2.8c, it is now trading at 3.7c (at the time of writing).
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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