Gold Holds Above $1,700 as Central Banks Juggle Hikes Against Recession Threat

Gold is starting a new trading week by holding above $1,700 an ounce, illustrating that while the environment where interest rates are constantly rising, there remain sufficient concerns about the macroeconomic and geopolitical global outlook to support the haven asset.

Positive jobs data out of the US on Friday has further demonstrated that the world’s largest economy remains in reasonable health so far, despite persistently high inflation. Whereas in previous months, these bullish figures would have been grounds for traders to anticipate a less aggressive monetary policy course by the Federal Reserve, the comments by senior Fed officials at the recent Jackson Hole gathering well and truly tempered expectations in that regard.

Later this week, the European Central Bank is expected to implement another rate hike, potentially increasing its benchmark rate to 1.25% as the continent’s bankers try to juggle the balancing act to try and curb inflation while not tipping the economy into a recession. Their position has become further complicated by Russia effectively cutting gas supplies to the region with the restart of the key Nordstream pipeline now delayed indefinitely.

This balancing act sums up gold’s current position too. Rising interest rates across the world make it difficult for the non-yield bearing asset of gold to make many gains while the growing fear of recession as well as the continued geopolitical fallout from Russia’s invasion of Ukraine provide sufficient support to gold as a haven asset to keep it above $1,700 an ounce.

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.

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.