Will the move in US interest rates trigger a reversal for gold – not so says Simona Gambarini.
by Simona Gambarini (Capital Economics)
The price of gold has increased sharply this year, but speculation about US interest rates has prompted suggestions that this upward trajectory will move into reverse. Not so, says Simona Gambarini, commodities analyst at leading economics research consultancy Capital Economics.
The gold price has risen close to 20% this year in US dollar terms, despite subdued buying from consumers in China and India, as well as emerging market central banks. In part, this reflects changing perspectives on US interest rates earlier this year. As it appeared less likely that the Fed would raise interest rates, the dollar weakened and the gold price rose. But increased concern about US inflation and a revival of safe-haven demand have also been important.
This range of influences suggests that the gold price should prove relatively resilient when the Fed raises rates again.