While the concerns over the Chinese economy affected stock markets and tensions persist in the Korean peninsula and the Middle East, the price of gold hit its seven-week high on Wednesday. Gold prices increased minutes after the December US Federal Reserve meeting concluded, where the policymakers decided for an interest rate hike. The Fed voiced their concerns over inflation being stuck at very low levels.
The Prices of Gold
At 8:30 in the morning (UAE time), spot gold was up at $1,098.04 per ounce with a peak of $1,102.60 later in the evening. This was recorded as the highest since early November last year. US Gold for February delivery, on the other hand, settled up 1.3%at $1,091.90 per ounce before the minutes were released.
“The December Fed minutes offered little lucidity to the timing of the next or the number of rate hikes in 2016. However, the ability of monetary policy to offset the economic effects of an unanticipated economic shock remained asymmetric. This is translated as ‘we want to reload the darn weapon’,” says Tai Wong, the New York-based BMO Capital Markets’ director of base and precious metals trading. He even added that the lack of revelations made gold prices rise to almost its session highs.
This 2016, we should expect the Fed to further raise interest rates; but, the frequency of hike rates remains to be discussed by officials.
The world stocks, on the other hand, fell for its five consecutive day as people get alarmed by the economy of China as they allowed the yuan to weaken even further. And the nuclear test conducted by North Korea this week also added to the many political worries we have this year.
“The geographical situation along with a cocktail of global market sell-offs s fueling this move,” says Ava Trade’s chief market analyst, Naeem Aslam.
According to the reports from North Korea, they’ve successfully conducted a test for their miniature hydrogen nuclear device last Wednesday. This alarmed both Japan and South Korea.
“Some risk aversion prompting safe-haven flows has helped gold. Physical demand has been pretty strong at the lower levels,” says Robin Bhar, an analyst for Societe Generale
What the Gold Prices Mean to the World?
As soon as the minutes were released, the US Dollar turned negative.
Gold has broken more than $1,088, above the key chart levels. This only indicates that the prices have bottomed or now after they were rebounding twice from the 1,045 area last December, according to several analysts.
Silver metal, on the other hand, was up by 0.4 at 14.02 per ounce. Meanwhile, platinum was down by 1.5 at $874.75 per ounce, as well as palladium, which was down by 4.8% at $508.50 per ounce (its biggest drop in 4 months time).
Previously, the prices of palladium dropped to its lowest for over 5 years earlier in the trade, having a price of $501.55 per ounce. This auto-catalyst metal, commonly used in industries, is said to more affected to economic weaknesses compared to gold.