Gold price rebounds on recession fears

By: Frank Knopers

Gold prices have been on an upward trend in recent weeks as investors worry more about a recession than central bank rate hikes. In July Decreased by producer prices in the United States for the first time since the start of the coronavirus pandemic. A striking break with the previous period, when logistical problems and high energy prices predominated. That now gives central banks room to raise interest rates less quickly.

In recent months, the prices of gold and silver have been under pressure, as we previously described in This article. A strong dollar and rising bond yields made investors less attractive to buy precious metals. On 21 July, the Gold price The price was then at €53,000 per kilo and less than $1,700 per troy ounce.

At the time of writing, the gold price stands at €56,021 per kilo, an increase of 5.6% from the low in July. With a price of $1,793 per troy ounce, the precious metal is 6.7% higher in dollar terms than the bottom of a few weeks ago. The silver price rose to €639 per kilo this week, which is already 10% higher than last month's low. Measured in dollars, the silver price recovered by 11% to $20.46 per troy ounce.

Gold price rebounds after downward trend in recent months

Recession fears

In recent weeks, sentiment has turned in favor of precious metals. Treasury yields are falling again, indicating weaker economic growth. High inflation is also causing a drop in demand, which means that retail chains are seeing their stocks increase again. The dollar index has also fallen back slightly after a long upward trend, which is beneficial for precious metals.

Due to a deterioration in a number of macroeconomic data, central banks may be less likely to raise interest rates. Even a complete turn in monetary policy is not ruled out in the medium term, as some indicators already point to a decline in interest rates and inflation. That argues in favor of precious metals.

As we mentioned earlier, Wrote the current rebound in the price of gold also fits into a historical trend. In the run-up to previous periods of interest rate hikes, the gold price also fell, only to rise again. In the first six months after the first interest rate hike, the precious metal was on average ten percent higher. Gold turns out to be the safe haven in bad economic times.

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