Commodity Blog

After slightly weakening on Tuesday, gold prices are surging once again during Wednesday’s trading session. The yellow metal is nearing a two-year high as the US dollar declined and investors have been trying to sort out the Brexit aftermath on global stock markets.

August gold futures climbed $9.28, or 0.71%, to $1,324.58 per ounce at 17:07 GMT. Gold prices are poised to reach their highest settlement level since July 11, 2014.

Silver’s performance was equally as impressive. September silver prices rose $0.46, or 2.57%, to $18.30 an ounce. Silver prices will finish the trading session above $18 for the first time since September 2014.

Year-to-date, gold prices are up 25% and silver prices are up 27%.

The steady gains in gold and silver prices cannot be attributed to just the Brexit fallout.

A new report found that US consumers reduced their spending in May, one month after consumers had splurged. Outlays rose only 0.4% last month as the rate of inflation remained relatively unchanged.

An increase in precious metal prices is also due to a drop in the US dollar and the Federal Reserve unlikely to raise interest rates next month. According to the CME Group FedWatch tool, there is a 2% probability of a rate hike in July. Odds for a September rate hike stand at just 1.2%.

In a low-dollar and low-rate environment, gold prices benefit. A falling greenback makes the yellow metal more expensive to purchase for buyers using different currencies. Meanwhile, low interest rates make gold attractive since investors are unable to find rising yields in certain investment vehicles.

With a great deal of global economic uncertainty, investors are using gold and silver as safe havens. As more than $3 trillion have been wiped off global stock markets, the demand for precious metals has been soaring.

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