Gold has climbed back above the key threshold of $1,700 an ounce as global bonds slipped into their first bear market in a generation.
The strength of the US dollar, which is trading near its record high, allied to the prospect of a sustained period of interest rate rises globally had pushed gold below $1,700 but the weakness of bonds has given gold a slight lift as investors seek alternative haven assets.
Today’s trading focus will be aimed at the upcoming US jobs data, which is expected to paint another healthy payrolls picture and follows on from a positive US manufacturing report. However, where previously these data would have been viewed as reasons why the Federal Reserve may not need to be as aggressive with its monetary policy for as long, the recent Jackson Hole meeting has brought a stark reappraisal that large interest rate rises are here to stay for the foreseeable future, with another 75 basis point increase expected later this month.
As such, while traders will undoubtedly keep a close eye on the US payrolls figure, the market reaction for gold is likely to be muted. The fact that gold has once again climbed back above $1,700 an ounce shows there remains support for the precious metal as it mirrors a similar move when gold plunged in July.
Yet while there is clearly support for gold around $1,700 an ounce, it is hard to see the metal making any further gains given how hawkish the Fed and other central banks around the world now are as they seek to curb inflation.
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