Gold has dipped slightly from the record high it achieved yesterday but still remains at one of its highest levels ever.
Renewed concerns over the health of the US banking sector allied to the end of the Federal Reserve’s hiking cycle drawing near have created the perfect conditions for gold to thrive with its lack of counterparty risk and safe haven appeal proving particularly attractive to investors right now.
The fact that gold has managed to climb so high in a week in which the Fed and the European Central Bank have announced interest rate hikes, events that are typically detrimental to gold, emphasises the extent to which investors have moved on from the near-term reality of higher interest rates and are instead looking further out to rates first pausing and potentially even being cut before the end of the year.
Market confidence remains very fragile with a broadly positive set of corporate earnings failing to lift the gloom hanging over equities and keeping investors and traders in risk-off mode, and therefore favouring gold over other asset classes.
How long gold can remain above $2,000 an ounce will depend on how quickly and permanently the issues the US banking sector is facing can be resolved and also on how successful the Fed and other central banks’ tight-rope act of curbing inflation without inducing a recession proves. But for now, gold is enjoying its moment in the sun and shining brightly while so many questions remain about the health of the global economy.
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.