Gold price ebbs off a high as U.S. economy proves robust
The gold price has edged off its nearly week-long rise today. Data from bullionvault shows that prices have settled to $1,225.67/oz, down from yesterday’s peak of $1,242.68/oz, the highpoint since the weekend’s flatline of $1220.25/oz.
The slowdown, in what looks to be a low-key bull market in gold, is attributable to ‘rising US wholesale inventories and an unexpectedly low number of Americans filing for unemployment benefits [which] also pushed up the US dollar and US bond yields’, according to the finance section of news.com.au.
Gold usually has a loosely inverse relationship with the stock market, but gold bulls shouldn’t be too worried long term. Paul Mladjenovic, who authored ‘Precious Metals Investing For Dummies’ and ‘High-level Investing for Dummies’, told marketwatch that although the US economy looks robust, future tax cuts and spending increases could potentially lead to an inflationary environment, which would be good for the gold price as ‘the dollar and other currencies are overproduced’.
Mladjenovic went on to say that gold’s primary function as an asset would go from a ‘safe harbour’ to an inflation hedge as the dollar goes on a bearish trajectory under Trump’s tenure. He therefore expects the gold price will break $1,300 and that silver will hit $25 by the end of the year.
It’s just over a month until the next Federal Open Market Committee (FOMC) meeting, and if this trend of strong economic data continues, the possibility of a rate hike is very real. This has the potential to dampen a twin-bull of economic indicators and gold if Fed policy twists growth to be inflation-free. Robin Bhar, at Societe Generale, told news.com.au that ‘If people were betting on the Fed being more relaxed and rates being lower for longer, this (data) has muddied that picture’.
Regardless, a rate hike could be a good idea long term. If economic trends continue there may be less recourse to central bank financing. William White, Chairman of the OECD Economic and Development Review Committee, told the London Bullion Market Association conference in Singapore last year that attempting to advance future spending through loose monetary policy and price setting can lead to currency collapse and hyperinflation. Whilst this may be good for the gold price, an unhealthy economy isn’t exactly a desirable environment.
Link to this article: : http://www.goldmadesimplenews.com/gold/gold-price-ebbs-off-a-high-as-u-s-economy-proves-robust-12962/