Gold prices are on a roll, buoyed by the prospect of looser monetary policy in the US.
Bullion, traditional rival to the dollar as a safe-haven asset, was up 1.71% at $1,429.55 this morning having traded 1.23% higher on Tuesday at $1,405.45 a Troy ounce. A month ago, on 28 May, it was changing hands at a relatively-lowly $1,283.90.
Go back three months, and the price was a little perkier, at $1,319.35 on 25 March, but a year ago it was languishing at $1,269.80 on 25 June 2018.
“Best month in two years”
Its low point during the past 12 months was seen on 17 August, while its current price is the high point.
On Monday, Adam Perlaky, manager of investment research at the industry body, the World Gold Council, noted: “Gold rose over 4% last week, its largest upside move in over three years.”
He added: “Gold is having its best month in two years, having rallied nearly 8% in June, while it is up 10% over the past month.”
The gold rally can be attributed, in part, to the U-turn by America’s central bank, the Federal Reserve, on its previous policy of gradually bringing interest rates back to more normal levels. From 2008 to 2015, the key Federal Funds rate was set at an all-time low range of 0% to 0.25% to combat the effects of the Great Recession.
His war of words with the Fed erupted again this week, when he said he had the authority to fire Fed chair Jerome Powell, although had no plans to do so.
Constitutional experts have disagreed, saying the Fed’s monetary policy decisions cannot be used as a reason to dismiss its chair.
Meanwhile, Mr Powell has shifted ground somewhat this year. In March, he said that the US economy remained strong, which would normally be a signal of higher rates. But he added that weakness in China and Europe was acting as a drag on American growth, saying: “Just as strong global growth was a tailwind, weaker global growth can be a headwind to our economy.”
Since then, the Fed’s tone has softened further, to the extent that a rate cut is expected when it meets next month.
Lower rates make dollar-denominated assets less attractive, and the dollar stood at €0.8804 this morning, having been €0.8936 a month ago on 27 May and €0.8872 three months ago, on 26 March.
This relationship is further complicated by the fact that bullion is priced in dollars.