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Middle East Unrest Pushes Investors Towards Gold and Silver

Daniel Kim Views  

International gold prices hit a record high on the 20th (local time).

The June gold price on the COMEX in New York closed at $2438.50 per ounce, an increase of $21.00 (0.87%) from the previous trading day.

Expectations of a cut in the U.S. benchmark interest rate, China’s economic stimulus measures, and geopolitical tensions in the Middle East were among the factors that boosted gold demand and positively impacted its price.

Powered by the rise in gold prices, the price of silver also rose to its highest level in 11 years. The price of silver was recorded at $32.17 per ounce, a sharp increase of 2.2%.

Expectations are growing that the Federal Reserve (Fed) will cut interest rates in September as hopes for easing inflation grow following a slowdown in U.S. Consumer Price Index (CPI) growth last week. When interest rates decrease, the opportunity cost of holding gold, which has a low yield, decreases. This increases the demand for gold. Daniel Pavilonis, Senior Market Strategist at RJO Futures, explained, “The U.S. is coming out of debt, and indicators that deviate from inflation data have driven up gold prices.”

The increase in gold reserves by the People’s Bank of China is also supporting the rise in gold prices. China is a major consumer of gold, and there are predictions that domestic gold consumption in China will continue to increase.” Meanwhile, there are observations that the price of gold has soared as China issued a large amount of special national bonds to overcome the real estate recession.

Geopolitical tensions in the Middle East also continued to boost gold prices. The preference for safe assets increased following the death of Iranian President Ebrahim Raisi in a helicopter crash.

Pavilonis continued, “The fear of missing out on the gold rally is driving the short-term gold price to around $2500 per ounce,” and added, “The volume of inquiries for transactions to buy futures or take physical delivery is increasing.”

Daniel Kim
content@viewusglobal.com

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