Gold price to highest level in three months

Gold is off to a good start to the new year, as the Gold price reached its highest level in three months on Friday. At the time of writing, the price stands at €44,700 per kilo. This puts the precious metal just two percent away from September's all-time high. In dollar terms, the gold price rose by about $70 to $1,548 per troy ounce over the past two weeks, the highest level in almost four months. The price increase is the result of a weaker dollar and rising geopolitical tensions in the Middle East.

On Friday, the Gold price up by 1.86% as a result of a U.S. Missile attack at Baghdad airport. In the process, the Iranian general Soleimani was killed. An Iranian commander and a number of soldiers were also killed in this attack. This missile attack threatens a further escalation in the region. These geopolitical tensions are causing a flight to gold. The oil price also rose by more than 4% as a result of this attack.

Gold price at highest level in three months

Upward trend

Gold has historically had a negative correlation with the dollar, which means that they often move in opposite directions. Since December, the dollar has been in a downward trend again, which benefits gold as an alternative safe haven. Silver is following this upward movement and is at €525 per kilo at the time of writing. At the beginning of December, the silver price stood at just over €480 per kilo. For the whole of 2019, gold achieved a return of 22.7%, while silver increased in value by 19.2%.

The gold price rose in September to Record, but after the announcement of new monetary stimulus by the ECB and the Fed, calm returned to the financial markets. As a result, interest rates on government bonds rose and precious metals lost part of their profits. It turned out to be a temporary correction, as the prices of precious metals rose sharply again in December.

Gold price was also supported by a Facilitation capital requirements for Chinese banks. The Chinese central bank is giving banks more room to lend in the hope that this will help the economy pick up again.

Fed interest rate decision

Investors are also looking ahead to the minutes of the Fed's latest interest rate decision, due later today appear. These minutes can provide insight into the U.S. central bank's strategy regarding the repo market. In recent months, the Fed has pumped more than $250 billion in liquidity into the banking sector to ensure the stability of the financial system. In October, the central bank also launched a new Buyback program of $60 billion per month. The question is how long the central bank will maintain this accommodative monetary policy.

This contribution was made from Geotrendlines