The price of gold climbed to a two week high this week as investors sought safety in the precious metal amid growing worries about the rising debt of the United States and weak demand for long term government bonds. Spot gold reached $3336.43 per ounce early Thursday, equivalent to approximately £2,750, its highest price since May 9. Gold futures in the US also rose to $3337.60 per ounce.
The rise in gold comes as the US dollar weakened to near a two week low, making gold cheaper for those holding other currencies. Analysts say the increase in gold prices reflects both the weakening dollar and persistent economic concerns in the US, including stagflation risks, which is a dangerous combination of inflation and stagnant growth.
Kelvin Wong, a senior market analyst at OANDA, noted that these factors support a bullish outlook for gold. Meanwhile, political developments in Washington are adding to uncertainty. The Republican controlled House Rules Committee recently advanced a bill proposed by former US President Donald Trump aiming to drastically cut taxes and government spending. This bill is expected to be put to a vote soon, creating further market tension.
The US Treasury also faced weak demand when it offered $16 billion worth of 20 year bonds, highlighting a lack of confidence in US debt instruments. This follows a downgrade of the US credit rating by Moody’s last week, which has unsettled investors and added pressure on the dollar and Wall Street.
Ilya Spivak, head of global macro at Tastylive, predicted that gold could reach yearly highs in the range of $3450 to $3500 per ounce (£2845 to £2885), signalling a strong long term trend for the precious metal.
Gold is traditionally seen as a safe haven during times of economic or political instability, and it tends to benefit from low interest rate environments. As global uncertainty continues, investors appear to be turning increasingly to gold as a store of value.
On the geopolitical front, attention is turning to the fifth round of nuclear talks between Iran and the United States, scheduled for May 23 in Rome. This diplomatic effort also adds to the complex mix of factors influencing global markets.
Other precious metals showed mixed results with silver rising nearly 1% to $33.66 per ounce (£27.75), platinum falling 0.4% to $1072.43 (£885), and palladium down 1.4% to $1023.50 (£845).
