Gold firms as economic fears return to centre stage
Gold rose on Wednesday as renewed fears of a recession bolstered bullion's allure as a safe haven and countered pressure from a firmer dollar, while investors awaited monetary policy cues from the Federal Reserve.
Spot gold reversed initial declines to rise 0.4% to $1 839.86/oz by 11:45 GMT, while US gold futures gained 0.2% to $1 841.70.
World stocks fell as concerns of rising interest rates and recession persisted.
Adding to this, soaring food prices pushed British consumer price inflation to a 40-year high of 9.1% last month.
"You have all the fears of rising recession risks and inflation providing quite a sound backdrop in terms of safe haven demand; not that everybody's rushing into gold, but people are clearly sticking to gold positions at the moment, said Carsten Menke, head of Next Generation Research at Julius Baer.
"But on the negative side, you have that very aggressive monetary tightening, most notably by the US Fed," Menke added,
Limiting advances in gold, the dollar index rose 0.1%, making bullion expensive for overseas buyers.
Powell is scheduled to testify before Congress on Wednesday and Thursday after the central bank lifted its benchmark interest last week by 75 basis points (bps) to try to tame inflation.
If Powell clears the way for another 75 bps rate hike in July, it would likely trigger further dollar strength and rises in yields, resulting in downside for gold, said Ricardo Evangelista, a senior analyst with ActivTrades.
"Otherwise, and this is the most likely scenario, should the chairman avoid such bouts of hawkishness, gold prices are likely to remain relatively stable," Evangelista added.
Higher interest rates increase the opportunity cost of holding non-yielding gold.
Comments
The
functionality
you are trying to access is only available to subscribers.
If you are already a subscriber, you can Login Here.
If you are not a subscriber, you can subscribe now, by selecting one of the below options.
For more information or assistance, please contact us at subscriptions@creamermedia.co.za.
Option 1 (equivalent of R125 a month):
Receive a weekly copy of Creamer Media's Engineering News & Mining Weekly magazine
(print copy for those in South Africa and e-magazine for those outside of South Africa)
Receive daily email newsletters
Access to full search results
Access archive of magazine back copies
Access to Projects in Progress
Access to ONE Research Report of your choice in PDF format
Option 2 (equivalent of R375 a month):
All benefits from Option 1
PLUS
Access to Creamer Media's Research Channel Africa for ALL Research Reports, in PDF format, on various industrial and mining sectors
including Electricity; Water; Energy Transition; Hydrogen; Roads, Rail and Ports; Coal; Gold; Platinum; Battery Metals; etc.
Already a subscriber?
Forgotten your password?
Receive weekly copy of Creamer Media's Engineering News & Mining Weekly magazine (print copy for those in South Africa and e-magazine for those outside of South Africa)
➕
Recieve daily email newsletters
➕
Access to full search results
➕
Access archive of magazine back copies
➕
Access to Projects in Progress
➕
Access to ONE Research Report of your choice in PDF format
RESEARCH CHANNEL AFRICA
R4500 (equivalent of R375 a month)
SUBSCRIBEAll benefits from Option 1
➕
Access to Creamer Media's Research Channel Africa for ALL Research Reports on various industrial and mining sectors, in PDF format, including on:
Electricity
➕
Water
➕
Energy Transition
➕
Hydrogen
➕
Roads, Rail and Ports
➕
Coal
➕
Gold
➕
Platinum
➕
Battery Metals
➕
etc.
Receive all benefits from Option 1 or Option 2 delivered to numerous people at your company
➕
Multiple User names and Passwords for simultaneous log-ins
➕
Intranet integration access to all in your organisation