Gold is showing tentative signs of regaining some ground after a punishing week on equity markets that, unusually, has seen the ultimate haven asset pulled down too to be trading at levels last seen in early February.
Indeed so far in early Friday trading, the bulk of equity and commodity markets are trading a little higher as investors view that this week’s losses may be an overreaction and taking advantage of lower levels to buy undervalued stocks.
Live Gold Price - $/oz
While the latest US inflation data did come in above market expectation, crucially it was lower than the previous month, giving hope that the worst of fast-rising consumer prices in the world’s largest economy may now be behind us. If this is confirmed over the coming months, then the Federal Reserve will be able to keep interest rate rises to 50 basis points, rather than 75 basis points or higher, providing markets with a clear trajectory to trade around.
Gold’s role within this environment of hawkish central bank policies contrasted by global equity indices nearing bear market territory presents a clear resistance and support factor on either side of the equation. As such, gold’s current trading level below $1,830 an ounce looks too cheap yet any gains are likely to be capped with a series of rate hikes diminishing gold’s appeal as a non-yield bearing asset.
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