A slew of factors have led to increased demand for the yellow metal, including worries about the ongoing trade war between the US and China.
The gold price powered through US$1,500 per ounce for the first time in six years on Wednesday (August 7) as concerned investors sought it out as a safe haven.
A slew of factors have led to increased demand for the yellow metal, including worries about the ongoing trade war between the US and China, and interest rate cuts from central banks around the world.
Trade war tensions have ratcheted up since US President Donald Trump announced last week that the country will be adding a 10 percent tariff on another US$300 billion worth of Chinese imports. The new tariffs will come into effect on September 1.
Its actions sent global markets into turmoil, and prompted the US treasury to call China a currency manipulator — a move that China has said will hurt financial systems internationally.
While Trump has brushed aside comments that the trade war will now become even more protracted, experts are less optimistic and believe the situation may be turning into a currency war.
As mentioned, aside from trade war developments, gold has been impacted by central bank rate cuts, including last week’s reduction from the US Federal Reserve. The central bank cut rates last Wednesday (July 31) for the first time since 2008, dropping them by a quarter point to a range of 2 to 2.25 percent.
While precious metals initially slid after the news hit, their recovery has been swift. Central banks in India, New Zealand and Thailand have now also cut rates, creating further anxiety about the global economy and increasing the appeal of safe haven commodities like gold.
Speaking about gold’s positive price move this Wednesday, EB Tucker said he thinks its upward momentum represents a key breakthrough for the metal.
“I’m shocked by how many professional investors are on vacation right now checking emails once a day. Add to that the longtime gold bulls who tell me they don’t trust this rally. Believe me, it’s real. And both of these groups will chase the price higher when they finally plug back in. If you’re long gold now the action to take is no action at all,” he said.
Tucker, who is a director at Metalla Royalty & Streaming (TSXV:MTA,OTCQX:MTAFF) as well as the mind behind two publications at Casey Research, predicted at the end of 2018 that gold would reach US$1,500 this year. He reiterated that call last week at the Sprott Natural Resource Symposium.
In terms of where the gold price may go from here, Tucker said that he sees the precious metal moving higher before pulling back.
He’s also got his eye on silver, which he believes will move up to US$20 per ounce. “At some stage silver wakes up and plays catch up. That’s a move worth owning,” he said. “We could easily see US$20 per ounce silver, which is a roughly 18 percent move from here. That can happen quickly.”
Like gold, silver has been moving this week, and crossed the $17 line for the first time in over a year on Wednesday. Silver is more volatile than gold, and typically outperforms both to the upside and downside.
As of 11:30 a.m. PDT on Wednesday, the gold price was holding above US$1,500 at US$1,507.35. Silver was above US$17 at US$17.22.
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Securities Disclosure: I, Charlotte McLeod, hold no direct investment interest in any company mentioned in this article.
Editorial Disclosure: The Investing News Network does not guarantee the accuracy or thoroughness of the information reported in the interviews it conducts. The opinions expressed in these interviews do not reflect the opinions of the Investing News Network and do not constitute investment advice. All readers are encouraged to perform their own due diligence.