Gold enters the last day of July still holding above $1,950 an ounce and on course for a sizeable monthly gain.
Gold’s buoyancy is based on the expectation that central banks around the world are coming to the end of their cycle of interest rate hikes. After the Federal Reserve and the European Central Bank both delivered their expected increases last week, this week brings the latest decisions by the Reserve Bank of Australia and the Bank of England with further hikes widely anticipated.
Yet despite this flurry of hikes, traders and investors are looking past the current moves and instead focusing on whether these are the last increases and how close we are to the peak of interest rates globally. This forward-looking stance has enabled gold to shrug off any hits to its price it would otherwise have received in reaction to these rate hikes as during times of rising rates gold’s appeal can dwindle due to its lack of yield with other interest-bearing assets favoured instead.
(Kinesis Money’s KAU product solves that conundrum with its gold-backed currency providing holders with a monthly yield based on transactions using the coin in the previous month)
Assuming this week’s interest rate moves conform to expectations, with the Bank of England the likeliest source of an outlier decision, then gold can continue to trade at these elevated levels into the early part of August. How long it can hold there for will depend on how quickly confidence flows back into equities markets now that inflation finally looks to be on a steadily downward trajectory and GDP data shows economic growth is continuing despite the higher interest rates.
Gold has been a big beneficiary of the lack of market confidence evident for much of 2023 so a more bullish stance is likely to see it finally fall away from the historic high levels the precious metal has managed to achieve throughout the second quarter and into the start of the third quarter.
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.
This publication is for informational purposes only and is not intended to be a solicitation, offering or recommendation of any security, commodity, derivative, investment management service or advisory service and is not commodity trading advice. This publication does not intend to provide investment, tax or legal advice on either a general or specific basis.
