Over fears of a possible recession in the US economy and slowing global economic growth, investors are now betting on safe-haven assets such as gold and silver. At the start of trading this week, gold prices rose to a three-week high. The increase was also exacerbated by the continued weakening of the US dollar. Spot gold rose by about 0.5 percent this week to a value of around US$1,320.94 per ounce. Prices recently peaked at US$1,321.13 last month. All in all, prices have risen for the third consecutive week.
According to the managing director of RBC Wealth management, George Gero, there have been a few factors that have resulted in the rapid increase in gold prices. These factors include the dollar index, the decrease in stock market prices, and global interest rates. He also mentioned that the political turmoil in Britain centering on its planned exit from the European Union has played a part in attracting investors to safe-haven assets. However, Gero does not believe that any of these factors will push gold past the US$1,350 mark.
In the United States, equity markets began to falter as it hit a 12-day low at the start of the week. The inversion in the country's bond yield curve further worried investors, who now fear a possible recession. This greatly increased the demand for safe-haven asset and more secure currencies. The concerns in the US market were also worsened by global growth stagnation and the disfavoring of the US Federal Reserve in increasing interest rates.
Some analysts believe that if the different situations do not get better, gold could head towards a US$1,364 per ounce price point or higher. Speculators have reacted accordingly and have increased their long positions of different gold-related stocks and assets, including COMEX gold.
Holdings in the world's largest gold exchange fund, SPDR Gold, also rose sharply with about a 1 percent rise in the last week alone. According to Atlanta Wealth, the rise in the prices of gold is a clear sign of a new period of high uncertainty. Fundamentalist traders are now shifting towards safer options for their assets, which mean that there could be a substantial breakout.
Prices for other valuable metals also rode the trend of rising gold prices in the various markets. Palladium had risen by as much as 0.4 percent, reaching a high of about US$1,568 per ounce. Silver had also followed suit and experience an increase of about 0.8 percent, reaching a high of US$15.54. Other precious metals, which are still considered safe investments, such as platinum had also increased. Platinum prices saw an increase of about 0.9 percent, reaching a high of US$851.85.
