Gold Bullion Price Building On Solid Gains
Last Thursday, Gold built on its solid gains capitalizing on a weaker USD, and real interest rates dipping to a 1-year low, as inflation picks up in the the US economy.
In active afternoon trading Thursday, Gold futures in New York for delivery in August, the most active contract, were trading at its high for the day of 1,274.40, of + 1% from Wednesday’s close and followed through Friday +0,28% at 1276.30 oz
YTD the precious Yellow metal is higher by just over 20%, the best start to a year in a decade.
The $72 up leg up was driven by the recent NFP’s (non-farm payrolls) which resulted in 1 of the biggest 1-day spikes in Gold this this year.
The jobs numbers which showed participants and the financial world the slowest gains in new positions in almost 6 years have postponed the likelihood of a Fed rate hike to at least beyond this Summer.
Higher interest rates raises the opportunity costs of holding Gold as the metal provides no yield and any gains for investors is through price appreciation.
The jobs data also hurt the USD which usually moves in the opposite direction of Gold price.
The Gold price has a close correlation to real interest rates, i.e. after adjusting for inflation, and with core inflation in the US now above 2% thanks in part to higher Crude Oil prices, real interest rates are forecast to stay at lower levels for some time to come.
The 10-year Treasury Inflation-Protected Securities (TIPS) yields fell to their lowest level in over 1 year last week.
Further, real interest rates have turned negative as Japan, Switzerland and the Eurozone embraced negative interest rate policies to stimulate their economies.
Have a terrific week.
Latest posts by Paul Ebeling (see all)
- Shiller, “Don’t Sell Stocks Because of High Valuations” - March 24, 2017
- Key Stock Indexes, Crude, Gold & Silver Markets Briefing - March 24, 2017
- Wall Street’s Top Analysts Upgrades, Downgrades & Initiations - March 24, 2017