Following a recent surge, the price of gold has shifted, with new data supporting a broader market rally while alleviating concerns about a possible hard landing for the U.S. economy. Last week, bullion for immediate delivery recorded a 1.9% rise, a huge recovery from the almost 3% decrease it recorded during its losing streak.
This rebound was observed after the U.S. Department of Labor released data reporting the largest reduction in unemployment benefit applications in almost 12 months. This development has increased optimism that the Central Bank may start easing monetary policy as early as September while steering clear of recession.
Despite this positive shift, the international market experienced volatility last week, driven by tighter monetary policy from Japan’s central bank and fears of a recession in the United States, which set off currency fluctuations and a selloff in equities.
While gold still acts as a safe haven asset during times of turmoil, the precious metal may also experience some weakness under such conditions.
The gains recorded by the metal last week brought the price of the metal close to the highs it recorded in July. Now swap traders have reduced their expectations for rate cuts in 2024, after forecasting more aggressive decreases.
Most economists who took part in a survey conducted by Bloomberg now expect only a quarter-point reduction in rates next month, a view that disagrees with calls for a bigger decrease from some major banks on Wall Street.
The metals’ next challenge should come with the announcement of inflation data.
Investors are already watching for the upcoming consumer and producer price index readings set for this week to see whether inflation will continue to drop. This would back the case for the Federal Reserve reducing interest rates by next month.
Thus far into the year, gold’s price has risen by about 18%, primarily driven by expectations of a decrease in interest rates by the U.S. Central Bank. The precious metal often benefits from monetary easing because it doesn’t yield interest. Other factors that are contributing to the metal’s positive performance include safe-haven purchases triggered by conflicts in Ukraine and the Middle East, and increased purchases by consumers in China and various central banks.
Helima Croft, an analyst from RBC Capital Markets, noted that the combination of fears of recession, geopolitical risks, anticipated reduction in rates of interest and heightened volatility had driven the price of gold to its current level.
The resilience shown by gold during these turbulent market conditions suggests that as exploration companies such as Emperor Metals Inc. (CSE: AUOZ) (OTCQB: EMAUF) (FRA: 9NH) bring new mines into production, the shareholder value delivered is likely to be higher than initially projected.
NOTE TO INVESTORS: The latest news and updates relating to Emperor Metals Inc. (CSE: AUOZ) (OTCQB: EMAUF) (FRA: 9NH) are available in the company’s newsroom at https://ibn.fm/EMAUF
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