Overnight trading in Asia saw gold prices spike to a three and a half month high, mainly due to drifting expectations of when the United States would raise interest rates. Gold prices were even able to briefly break a key resistance barrier.
The price of gold rose above $1,174 at one point, breaking through August’s high watermark of $1,170 per troy ounce. Many alalysts view this as a critical test for gold prices, as traders often choose to bail out of rallies at such technical benchmarks. These price benchmarks, therefore, tend to act as a ceiling on upwards price swings. Breaking clear of such thresholds usually indicates a stronger price surge to come.
Future Interest Rate Hikes in US Driving Price Surge
As a purely financial investment, gold is a non-yielding asset and benefits from low interest rates. Most of the recent demand investment demand for gold is wrapped around the notion that the Fed is unlikely to raise interest rates in the near-term. Worse than expected retail sales figures from the United States have caused the dollar to fall to a 3 1/2 week low. This sign of decreasing consumer demand, coupled with a Fed Beige Book report showing tightening labor markets in the US, is pushing the the gains in the precious metals markets.