Gold has tested record highs once again this week despite some choppy trading. A mixture of geopolitical and economic concerns is helping to support gold prices ahead of the key fourth quarter that could see further gains.
They key market movers this week came in the form of inflation data from the US. Data releases on Tuesday and Wednesday both came in slightly below expectations, and both heading in the right direction towards the Fed’s target of 2%. With the fall expected however, it was largely priced-in, and the initial run-up to the release had the greater impact than the actual figures themselves.
Gold had steadily climbed over the course of the week and saw a very brief spike of $2,490.43 per ounce Wednesday as the inflation data dropped. That would represent a new intra-day high but stopped short of $2,500 as profit-taking took over. In Euros gold hit a peak of €2,266.22 just shy of it's all-time high of €2,287.04 per ounce.
Silver has yet to return to its springtime highs, with ongoing concerns over a potential global slowdown outweighing its renewed investment demand. It has had a positive week however and is up 4.5% in USD and back above $28 this morning. The gold-silver ratio has jumped back up to 88 after falling as low as 72 in May and could suggest silver is undervalued given the current strength of gold that will almost certainly drag silver up with it at some point.
Geopolitics is also driving safe haven buying. Ukraine’s incursion into Russia has put the latter on the back foot for now but is likely to result in a strong response from President Putin. In the Middle East tensions remain over the response from Iran against Israel’s killing of military leaders in the region. The US have sent over a submarine and aircraft carrier to help defend Israel and have warned an attack could come at any time, but efforts are ongoing to try and avoid further conflict.
Given the near-term outlook, and gold’s continued pushes towards $2,500, it seems only a matter of time before gold spot price pushes through this historic milestone, and gold futures markets have already traded above this level in recent weeks, making it a question of when rather than if we will see $2,500 per ounce.
