As equities continue to fall and cement global economic growth fears, investors are once again turning to the safe-haven nature of gold.
The price of gold climbed to its highest level in over six months on Wednesday (January 2), as sinking equities fueled concerns of a weakening global market, sending investors to the safety of the precious metals.
At the end of 2018, the yellow metal was set for its first annual decline since 2015, but also managed to reach a six-month peak thanks to stabilization in the yuan and concerns over the potential of a global economic slowdown.
“We are seeing a very risk-averse market right now,” said Craig Erlam, senior market analyst at OANDA.
Kunal Shah, head of research at Nirmal Bang Commodities in Mumbai, also weighed in, stating, “[e]conomic and geopolitical concerns mean it is only a matter of time before gold shoots up.”
Investors have also begun turning their attention to Federal Reserve Chairman Jerome Powell, as they await a statement from him on the US economic outlook and clues regarding interest rates for the year. Powell will be participating in a joint discussion with former Fed heads Janet Yellen and Ben Bernanke on Friday (January 4).
Furthermore, market watchers are also keeping a close eye on results of a US manufacturing report, which is due to be released on Thursday (January 3), followed by the December payrolls report on Friday.
“People are also expecting a softer dollar in 2019,” OANDA’s Erlam said, adding that gold prices could also be supported by a changing outlook for interest rates.
Many are expecting the three-year rate-hiking cycle in the US to end soon, which will be beneficial to the precious metals, and gold in particular, as this will more than likely soften the greenback, creating more value in the metals.
Earlier in today’s session, the United States Treasury market fell as it faced the potential of the Federal Reserve calling for a halt to its rate increases.
As of 10:30 a.m. EST on Wednesday, gold was up 0.18 percent and was trading at US$1,284.40 per ounce.
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Securities Disclosure: I, Nicole Rashotte, hold no direct investment interest in any company mentioned in this article.