Gold gains as global economy slows down
Gold is experiencing an uptick in the wake of worry about financial instability around the world.
Gold is on the rise again. The commodity’s price is rising up above $1,300 for its second straight gain of the week.
Why is the price of gold rising?
Gold has jumped to its current price of $1,308.70. Bullion usually goes up as the economy is slowing down. The current volatility on Wall Street and the lack of resolution in the US-China trade talks could make traders see gold as a safe investment. Edward Moya, market analyst at Oanda, wrote in a research note to investors that gold is on the rise because of financial concerns around the world.
‘Gold took some time but it finally broke away from $1,300 as a dovish[US Federal Reserve]and global growth concerns continue to be the dominant narrative on Wall Street,’ wrote Moya.
Gold futures are increasing because of concern that the US Federal Reserve may lower rates, which could possibly weaken the dollar and cause investors to look at the commodity as an alternative option. Francis Panizzutti, from metal trader MKS, noted that the global stock market is helping gold’s price rise.
‘A slowdown in Fed interest (rate) hikes, possibly a weaker or at least not strengthening US dollar, further US stock corrections and ongoing geopolitical instability are building the perfect storm (in favour of gold),’ said Panizzutti.
Financial analysts like, Suki Cooper, precious metals analyst at Standard Chartered Bank, also thinks that the Fed’s decision on interest rates will affect gold’s value.
‘The key factor to watch for gold is development surrounding the U.S. Federal Reserve (monetary policy), but we expect it to be on hold through the first half of the year,’ said Cooper.
What’s next for gold?
While some investors see gold as a temporary safety net during a volatile market, Cooper sees gold’s price increasing even if the market stabilises.
‘On the trade front, if we see the markets moving towards a compromise, it could be a positive development for the gold market,’ said Cooper.
The information on this page does not contain a record of our trading prices, or an offer of, or solicitation for, a transaction in any financial instrument. IG Bank S.A. accepts no responsibility for any use that may be made of these comments and for any consequences that result. No representation or warranty is given as to the accuracy or completeness of this information. Consequently any person acting on it does so entirely at their own risk. Any research provided does not have regard to the specific investment objectives, financial situation and needs of any specific person who may receive it and as such is considered to be a marketing communication. Although we are not specifically constrained from dealing ahead of our recommendations we do not seek to take advantage of them before they are provided to our clients. See full non-independent research disclaimer.
Speculate on commodities
Trade commodity futures, as well as 27 commodity markets with no fixed expiries.
- Wide range of popular and niche metals, energies and softs
- Spreads from 0.3 pts on Spot Gold, 2 pts on Spot Silver and 2.8 pts on Oil
- View continuous charting, backdated for up to five years
Live prices on most popular markets
You might be interested in…
Find out what charges your trades could incur with our transparent fee structure.
Discover why so many clients choose us, and what makes us a world-leading provider of CFDs.
Stay on top of upcoming market-moving events with our customisable economic calendar.