Hindu and Jain Holiday Help Drive Gold Prices
Gold prices rebounded Friday morning on continued geopolitical uncertainty. Gold came in at $1,267 per ounce. The commodity often sees surges in times of celebration in populous countries like India and China, where physical demand for gold jumps, and therefore, helps the precious metal rise in value.
Gold prices were also aided by a dovish European Central Bank (ECB), which chose not to raise interest rates or take up any other aggressive fiscal policies. This is in large part due to an imbalanced political situation in Europe that is leaving the ECB concerned.
With Brexit looming, a British election on the horizon, a French election nearing its conclusion on May 7, and a whole host of other political events putting pressure on governments, April 2017 saw gold prices rise due to the metal’s use as a hedge asset in times of uncertainty to ward off rapid swings in the market.
The U.S. economy saw its dollar rise in strength along with the gold price, a relative rarity, in that gold and the Greenback generally maintain an inverse relationship, with investors preferring to invest in interest-yielding U.S. bonds and similar assets over the non-interest yielding gold in good economic times.
The various political quagmires that the U.S. finds itself facing, however, have made gold the asset of choice for many investors seeking shelter from the potential fallout of a military confrontation or trade war. Both scenarios have been alluded to by the U.S. government, which has only served to further worry investors and increase the interest in gold.
Some analysts have put gold prices as potentially topping $1,400 an ounce by the end of the year if conditions remain.