Gold bulls rejoice amid ‘supportive’ global conditions

The gold price is approaching a one-month high, as analysts describe “supportive” global conditions for the precious metal.

Spot gold rose 0.7% to US$1,777.91 per ounce on Thursday, while U.S. gold futures gained 1% to $1,794.10.

Craig Erlam, a market analyst with Forex trading platform OANADA, said there are factors building that could be supportive to gold in the short term, including recession concerns.

“The Fed is really out in force this week trying to reinforce its message about the possibility of a larger September (rates) hike and not quickly reversing course next year, but investors seem keen to push back against that idea,” Erlam said.

Craig Erlam ~Gold bulls
Craig Berlam, senior market analyst at OANDA.

While some U.S. central bank officials have expressed their desire to rein in high inflation, one has noted that a hike of 0.5% next month might be enough to march towards that goal.

The gold price can be highly sensitive to higher interest rates because they increase the opportunity cost of bullion, which does not provide a yield.

Lending support to gold, benchmark U.S. 10-year Treasury yields slipped from their highest levels in more than a week, while the dollar also eased.

Investors now await the outcome of the Bank of England’s policy decision.

“Don’t expect a UK rate hike to be of much impact, except to maybe raise concerns about a central bank raising rates into a recession, prompting fears of a deeper economic fall,” said independent analyst Ross Norman.

Investors are also on the lookout for U.S. jobs data due on Friday.

Spot silver rose 0.7% to $20.18 per ounce, platinum gained about 1% to $906.57 and palladium added 1.9% to $2,056.03.

  • Additional reporting from Reuters