Gold Prices Reach 7 Month Peak

Last updated:

The gold rate has been holding steady since Monday, nearing a seven month peak. The momentum of the yellow metal is riding on the hopes that the US Federal Reserve will exercise a less aggressive policy on changing interest rates. Spot gold climbed to a strong value at $1,301.4 for an ounce and US Gold Futures soared by 0.2 percent to $1,301 for an ounce.

This was the first time the metal breached past the $1,300 barrier after repeatedly failing to do so in the last sessions, testing and beating resistance at various milestones along the way. Gold has climbed by more than 12 percent from the lows it saw during mid-August of last year, rising in terms of value as President Donald Trump temporarily called off the government shutdown.

Donald Trump wants the White House to back his $5 billion wall to keep illegal immigration in check, although many officials, Nancy Pelosi in particular, are flat out refusing to contribute so much as a cent. This growing split among US political officials is not doing the stock market any favors.

Investors believe that the value of gold will only continue to climb as tempers flare in the White House over funds for a wall. Meanwhile, Donald Trump seems to be hinting at the possibility of declaring a state of national emergency if he doesn’t get the funding he needs for his wall.

The yellow metal’s gains were held slightly back due to improving investor confidence, propelled by a report released by the Bureau of Labor Statistics which saw 312,000 new jobs being added to the labor market.

The Federal Open Market Committee will hold its two-day policy meeting on January 29 and 30. All investors will be shifting their focus towards the Fed’s monetary policy, which will play an important role in the value of gold. The lustrous metal tends to increase in value amidst lower interest rates, reducing the opportunity cost of holding of non-yielding bullion.

The Federal Reserve spiked interest rates four times in 2018 to 2.5% and signaled they would do so again twice in 2019, although members of the central bank say they will exercise more patience in raising interest rates.

The current haphazard geopolitical climate will only continue to bolster the precious metals market as investors will rush towards safer assets.

The US-China trade talks haven’t shown signs of improvement, although these talks are scheduled to resume this week. There is slight optimism in the air that the world’s largest economies might be able to reach a deal to put a stop to the dispute that is wreaking havoc across the stock market. In the case of a settlement, investors claim that the economic uncertainty will be alleviated to a certain extent at least.

The dollar index plummeted down to 95.75, causing other currencies to improve in value. This includes the Chinese Yuan which went up by 0.2 percent, the Australian dollar which moved up by 0.18 percent, and the New Zealand dollar which increased by 0.3 percent.

The US Federal Reserve will announce their decision at 7 pm GMT. Until then, the gold rates reported on Monday are still going strong.