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Gold Driven Higher by Low Yields and Soft Stocks

May 16, 2016 at 17:50 by Andriy Moraru

Gold is continuing to rise in New York today, following its earlier 1% gain in the London market. June futures for gold traded at $1,274.40 as of 17:35 GMT today.

The yellow metal fell sharply last week, ending with a loss of about 1.2%. But the previous uptrend may soon continue.

Spurred by recent negative economic reports from China and elsewhere, it seems that more investors are fleeing sagging stock markets in search of harder assets like gold and platinum.

European stocks fell on Monday, and China’s retail sales and factory output numbers all fell short of previous economic forecasts.

Beyond sluggish equities markets, gold’s price is also being supported by the negative interest rate outlook in the US.

So, it may be easy for gold to resume the same overall uptrend it has shown since January 2016.

Gold has climbed about 20% this year, mostly following the drumbeat of weak economic data from the US and elsewhere.

Investors may reason that, in an environment of low interest rates and weak stock prices, there is more advantage and less opportunity cost in holding “non-yielding” hard assets such as gold, platinum and other precious metals.

If gold prices close above $1,285 then the next milestone to watch for is the psychological trading threshold over $1,305 last achieved during the summer of 2014.

If you have any questions and comments on the commodities today, use the form below to reply.

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