Why the gold price has soared over 25% in 2016
By Duncan Richardson, News Editor
24 Aug 2016
In the first eight months of 2016 the gold price denominated in sterling has soared from £700 per ounce to well over £1,000. Political and economic uncertainty post Brexit and the loose monetary policies adopted by the world’s major central banks have support the price.
Brexit grabbed all the headlines and undoubtedly boosted the price. However, the extreme volatility in the Chinese equity markets and continued desire by Central Banks to push rates lower have also supported the price.
However, in recent weeks the gold price has paused for breath and is trading in a narrow range just above $1,300 per ounce. As the dust settles. market participants are now looking to the Fed for clues on the bank's future interest rate policy. This could come as early as Friday when Janet Yellen addresses the press following a two-day meeting with the world’s most influential central bankers.
Higher rates should boost the value of the dollar, as increased borrowing costs make the dollar more attractive to investors desperate for yield. Theatrically gold should decline, however, in recent history gold has performed well in response to rising interest rates.