Gold has fallen back below $1,930 an ounce in the face of a strong US dollar and renewed fears over inflation after oil prices climbed following OPEC+ extended their supply cuts.
The medium-term direction of gold looks unclear while investors and traders remain unconvinced of the true health of the global economy. While employment data has generally held up well in the face of high inflation and rising interest rates, central banks’ battle to fully curb inflation looks far from over with Bundesbank President Joachim Nagel warning that any pause in interest rate hikes is unlikely to be quickly followed by rate cuts.
So while further hikes, particularly in the US, are looking less likely, gold looks set to have to endure a period of high-interest rates, reducing the appeal of the asset against other interest-bearing classes, such as bonds.
In truth it is remarkable that gold has continued to trade above $1,900 an ounce for so long given that interest rates are now above 5% in both the US and the UK and close to that in Europe. Lingering fears that the world is heading for a recession and market confidence that is still very fragile following shocks such as the US banking crisis earlier in the year have ensured that gold’s safe haven qualities have continued to appeal.
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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