The spot gold price surged higher on Thursday, after trading in a narrow trading range for the best part of two months, breaking the downtrend its been stuck in since mid-August this year.
Not only that, at 2.46%, Thursday’s gain was the largest in percentage terms since June 24, 2016, the day after the UK Brexit vote.
Vivek Dhar, Mining and Commodities Analyst at the Commonwealth Bank, put the sudden and substantial buying burst down to a combination of continued steep declines in US and European stocks as well as renewed weakness in the US dollar.
“Gold prices rose by the most since June 2016 as falling equity markets spurred safe haven demand,” he said. “Prices also gained as the US dollar weakened after US inflation grew at a slower than expected pace in September.
Dhar says the outlook for the gold price will likely be determined by movements in the US dollar, rather than changes in real US bond yields that have been influential in the past.
“We continue to tie our gold price expectations to US dollar movements,” he says.
“A stronger US dollar will weigh on gold prices and vice versa.”
With plenty of macro risks still to come in the month ahead, including the US mid-term elections, the prospects for gold are seemingly looking a lot brighter, especially given it’s now broken out of its downtrend.
The spot gold price currently trades at $US1223.03 an ounce, according to pricing from Thomson Reuters.
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