Gold is hovering around $1,920 an ounce at the end of the week with the price sliding as a result of the strength of the US dollar.
A slight weakening of the dollar on Friday has enabled gold to perk up slightly but the trend remains downward for the precious metal.
The latest jobs data out of the US pointed to an economy still holding up well in the face of the Federal Reserve’s series of interest rate hikes and while another hike later this month may not be needed, the rates are unlikely to drop anytime soon.
Given that physical gold with its lack of yield is less attractive to investors and traders at times of high and rising rates, the next phase of “higher for longer” interest rates looks challenging for gold’s ability to continue trading at such elevated levels. It is worth recalling that even though gold has dipped from the highs above $2,000 an ounce touched earlier in the year, $1,920 remains a very high level historically for gold to be trading at.
The key factor that has kept gold so buoyant despite rising interest rates has been the fragility of market confidence but the longer the economic data continues to show that recession fears are overdone, the more trading activity will shift towards riskier assets and away from the ultimate haven asset in gold. All things considered, it now looks a matter of time before gold slips below $1,900 an ounce and as and when that threshold is breached, the price reaction will be crucial in determining how fast and low the gold price will fall.
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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