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As Economic Fears Provide Support, Gold Moves Higher

by Carl Steward
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GoldAs Economic Fears Provide Support, Gold Moves Higher

 Concerns over the economy’s development helped gold prices rise slightly on Tuesday, although gains were restrained by a strong dollar and approaching interest rate increases.


At 0501 GMT, spot gold was up 0.1 percent to $1,810.45 per ounce. American gold futures increased by 0.6% to $1,812.20.


Stephen Innes, managing partner at SPI Asset Management explained that while we are trapped in the $1,790 to $1,830 zone, gold might be supported by recession fears and perhaps the Federal Reserve relaxing its policy stance as the market pivots from inflation concerns.  When the economy is in a slump, such as during a recession, gold is viewed as a secure store of value.


Will Gold Remain Under Pressure?

The past several months have seen pressure on gold as a result of major central banks raising interest rates to rein in inflation. OANDA senior analyst Jeffrey Halley stated that overall, gold’s price action is still unimpressive, posting a series of lower daily highs over the previous month, suggesting the downward remains the weakest line of travel.


According to Halley, the general decline in U.S. yields appears to be postponing the inevitable decline in the price of non-yielding gold. Standard U.S. 10-year Treasury rates marginally increased from Friday’s one-month low as trading resumed after the Independence Day holiday-extended weekend. However, they remained below 3 percent.


The dollar lingered close to a two-decade top and kept eroding demand from customers holding foreign currencies for gold with a greenback price.  While the recent sell-offs were tempered by encouraging economic data and signals of lessening Sino-U.S. tensions, most purchasers stayed away due to persisting concerns about a worldwide recession and sky-high inflation.  Spot silver increased 1% to $20.16 per ounce, while palladium increased 1.1% to $1,943.16 and platinum decreased 0.4% to $882.50.

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