Gold prices have been pushing aggressively to the upside, particularly since the back-end of last week. The precious metal today, Tuesday, managed to jump to a nine-year high as investors continue to pile in.
One of the key drivers is central bank stimulus and much more is still anticipated, given fragilities that still remain in some leading economies.
Gold typically benefits from global stimulus, the reason is because the metal is widely viewed as a hedge against rising prices i.e. inflation and currency debasement.
Action is being taken by central banks in the likes of; the ECB with a stimulus program of total stimulus program to 1.35 trillion Euros ($1.54 trillion). the Bank of England having a total value of its Asset Purchase Facility (APF) of some GBP745bn. and the FOMC which has conducted around $7 trillion.
There is more action being largely considered by the United States, coordinated by the Fed Chair Powell and his governing council.
Lastly, markets have been largely risk-on also; this can be observed with the stock indices and riskier FX with that being seen, investors will want a hedge against this. The USD weakness has additionally been an added help for Gold prices being elevated.
According to Citigroup’s third-quarter commodities outlook, the price of gold “is expected to climb to an all-time high in the next six-to-nine months, and there’s a 30% probability it’ll top $2,000 an ounce in the next three-to-five months.” Nominal gold prices have already posted fresh records in every other G-10 and major emerging market currency this year, it is only a matter of time for fresh highs in US dollars.
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