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Gold tops $1,400 on weak dollar and geopolitical, economic worries
HONG KONG, June 21, 2019 (BSS/AFP) – Gold prices broke $1,400 an ounce to
hit a near-six-year high on Friday as the weaker dollar, economic concerns
and geopolitical tensions saw investors pile into the safe-haven commodity.
Demand surged after the Federal Reserve on Wednesday indicated it would
likely cut interest rates soon — for the first time in a decade — which
sent the dollar tumbling across the board and making it cheaper to buy the
yellow metal.
The announcement came as central banks around the world adopt a more
dovish stance in the face of a stuttering global economy and as investors
fret over the trade outlook with the US and China embroiled in a long-running
trade war.
It also coincided with news that Iran had shot down a US “spy drone”,
which it said was in its airspace, ratcheting up a standoff with Washington
and fuelling concerns of a conflict between the old enemies.
Gold prices have surged around 10 percent in June and an ounce cost $1,411
in Asian trade, its highest since September 2013.
“Toppling bond yields have historically been significant indicators for
the pulse of the markets,” said Stephen Innes, managing partner at Vanguard
Markets.
“Falling yields continue flashing red with recessionary concerns, while
the strengthening yen is a harbinger of market worries, suggesting that haven
demand is loading up on risk premiums as the potential for geopolitical
trouble mounts.”
Neil Wilson, chief market analyst at Markets.com, added: “The opportunity
cost of holding gold is significantly lower as real yields fall, while the
rather dubious and risky outlook for the global economy, US-China trade and
geopolitical tensions in the Middle East mean there is plenty of reason to be
seeking shelter in gold.”
Gold prices hit a record high above $1,900 in 2011 during the eurozone
debt crisis.
However, it began falling two years later when the Federal Reserve
indicated it would begin winding down its huge bond-buying stimulus programme
put in place to weather the global financial crisis. The move to tighten
monetary policy saw the dollar strengthen, making gold more expensive to
holders of other currencies.
“The past seven years of hawkish promises about higher rates and central
bank balance sheet unwinding was, as gold investors warned, a blip in the
trend of monetary policy that is loose, looser and looser still,” said Ned
Naylor-Leyland of Merian Global Investors.
BSS/AFP/HR/1355