Gold has proved surprisingly buoyant to climb above $1,700 an ounce benefiting from a weakening in the US dollar – which the precious metal enjoys an inverse correlation with.
Gold may also be benefiting from the sell-off on cryptocurrencies with investors switching back to the time-worn haven asset after seeing the problems the challenger is experiencing.
The fact that gold has been able to make these gains even after last week’s latest rise in interest rates by the Federal Reserve points to increased market jitters. Ever-increasing interest rates have put gold under considerable pressure with the precious metal’s lack of yield making it less attractive compared with interest-paying assets such as gold.
As the results of the US midterm elections emerge, investors will pay close attention to the dollar’s reaction with the initial take pointing to fewer gains for the Republicans than initially forecast.
Further weakening of the dollar will provide more scope for gold to climb higher yet but the reality of another interest rate hike likely coming from the Fed in December, as well as talk of more hikes by the European Central Bank and the Bank of England among others, should limit how much further gold can gain.
For the time being at least, gold has broken out of its range. If it can end the week still above $1,700 an ounce then it will create a new phase for gold’s price action.
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