Gold prices could tip either way in my view in the weeks ahead, writes Senior Bullion dealer Oliver Temple. On one side there is mounting pressure for interest rates to be pushed up in this country – Mark Carney, Governor of the Bank of England, is facing inside calls to do this possibly in the Autumn. In the US, the Fed is continuing with increasing rates there – last month rates were hiked to 1.25%.
Usually higher rates are a sign of more confidence in an economy. It’s in these periods that the precious metal tends to do less well. That’s because investors feel they are better returns to be had elsewhere. Markets, however, have not been convinced so far by the US Central Bank’s policy on rates.
In the UK, despite a blip after the UK election when spot prices increased quickly before falling back again, June’s gold prices were low. Investors may have been drawn to the rising eurozone bond yields.
So that’s one side which is keeping the metal down. On the other side of the gold price scales are increasing political tensions between the US and North Korea.
President Donald Trump has called North Korea’s missile test today (Thursday) ’very, very bad behavior’. He said that there would be ‘consequences’ for Pyongyang’s belligerence:
‘I have pretty severe things that we’re thinking about,’ he said, but added: ‘That doesn’t mean that we’ll do them.’
If military action is taken, it could send through ripples through the global economy. Remember that one of the key financial centres in the world is Seoul which is relatively only a few miles from the borders of North Korea.
Today, the precious metal inched higher at the time of writing to $1,222 an ounce.
Some analysts believe that gold’s next big move – which is near its 200 day moving average – could be decisive.
If it turns out that the patience runs out with North Korea and more severe action is taken, investors will probably be looking at gold as a way of protecting their portfolios. Some may also have wished that they had bought the metal at the current low prices.
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