Gold prices keep climbing, currently hovering around $4,500 per troy ounce. The metal has recently gained more than 3% and reached its peak levels since early June. What triggered this rally? A sharp drop in US bond yields and the dollar, following the Treasury Department’s unexpected decision to increase the volume of repurchase operations for long-term securities. The size of individual transactions involving 10- to 30-year bonds will at least double. As a result, yields on the former fell to 4.7%, while those on the latter slid to 5.2%. These developments make non-income-generating gold a more attractive investment alternative.
The precious metal also benefits from disappointing macroeconomic statistics from America. The August 14 retail sales report showed a sudden drop in July, heightening traders’ concerns about slowing consumer activity and diminishing expectations of a Federal Reserve (Fed) rate hike in September. That said, July’s FOMC meeting minutes were rather hawkish, with three committee members voting for a 25-basis-point increase and several others supporting the idea of further monetary tightening in case inflation remains above the central bank’s target. Meanwhile, the US government debt has just crossed the $40 trillion threshold, raising genuine concerns over the country’s fiscal stability and fueling interest in bullion.
The final recommendation:
— Buy gold at the current price of $4,500, targeting $4,900 within a month.
— Place a Stop Loss order at $4,200 to mitigate the risk if the market moves against us.
This content is for informational purposes only and is not intended to be investing advice.
