Gold Near Record, US Political Tensions Make Investors Nervous
Global gold prices remained near their all-time high, trading around $3,773 per ounce when Asian markets opened this morning. This was less than $20 shy of the record set last Tuesday. Over the past week, gold prices have risen 2%, driven by surging demand from institutional investors via ETFs, as well as rising global geopolitical tensions, including between Russia and Europe.
Investors' primary focus right now is the potential for a government shutdown in the US. If the US government fails to reach a budget agreement before Tuesday, the release of crucial employment data, such as Friday's Non-Farm Payrolls, could be delayed. This could further cloud the direction of the Fed's interest rate policy, as the Non-Farm Payrolls (NFP) is one of the central bank's main benchmarks.
Amid this uncertainty, gold is sought after as a safe haven asset. Moreover, if the final employment data is weak, the potential for a Fed rate cut will increase. This could further boost gold prices, as low interest rates make non-yielding gold more attractive. Not just gold, silver prices have also risen sharply. Silver briefly reached $45 per ounce last week, its highest level in 14 years. The surge in demand through ETFs has tightened physical supply, and the cost of borrowing silver (lease rate) has soared above 5%, far from its normal near-zero level. (ads)
Source: Bloomberg
