Gold is holding comfortably above $1,950 an ounce with the precious metal still finding support on a positive day for equities markets.
After Friday’s surprisingly strong US jobs figures, this week will be dominated by what course of action traders and investors anticipate the Federal Reserve taking when its interest rate committee meets next week. After initial consensus that a pause on further hikes was the likeliest choice, the outlook started to shift back towards the prospect of another increase before Patrick Harker’s comments last week once again made a pause the favourite.
Just as the consensus has oscillated, so has the price of gold and now after dropping about $100 from its early May peak, the precious metal looks to have found some stability above $1,950.
Assuming the Fed does indeed hold off on any further rate hikes next week, then gold would be a beneficiary, along with vast swathes of equities, as for gold it would reduce its negative appeal at times of rising interest rates while for equities it would put a cap on borrowing costs.
As such, next week may see the unusual continuation of gold and equities moving in the same direction. However, this phenomenon is unlikely to last for long as in the medium-term a bullish stock market outlook feeding off a strong US economy and a more dovish Fed would reduce gold’s safe haven appeal. So while gold continues to trade at elevated levels in the short-term, its medium outlook seems cloudier.
Rupert is a Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. He brings with him a breadth of experience in writing about energy and commodities having worked as an oil markets reporter and then precious metals reporter during the seven years he worked at Bloomberg News.
As well as market analysis, Rupert writes longer-form thought leadership pieces on topics ranging from carbon markets, the growth of renewable energy and the challenges of avoiding greenwash while investing sustainably.
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