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Updated 12:02 17/08/18

Gold jumps above £1000/oz for first time in 2 months

By Peter Walden, News Editor

18 Aug 2017

Gold jumped over £1,000 yesterday, the highest since mid-June, as global stocks fell as investors reduced exposure to riskier assets after rate-setters from Europe and the US remained wary on the economic outlook on both sides of the Atlantic.

European Central Bank’s (ECB) minutes from late July, only published yesterday, highlighted concerns that inflation in the 19-nation eurozone remains too low despite what appears to be an improving economy. The ECB also remained cautious about withdrawing the eurozone’s €2 trillion quantitative easing (QE) programme too quickly, causing the euro to snap back.

The recent strength in the euro, which recently hit a two-and-a-half-year high against the dollar and gaining almost 5% on a basket of global currencies since May, has been tied to increasing expectations QE would soon be tapered, however, this now looks unlikely in the short-term. The gradual winding down to the ECB QE programme is now likely to start in early 2018, taking six to nine months, followed by interest rate hikes later in the year. Across the Atlantic Federal Reserve policymakers also voted, as was widely expected, to keep interest rates unchanged, but also remained split over how to deal with weak US inflation.

Overall market conditions for gold continue to remain bullish despite tensions between the US and North Korea ratcheting down. Yesterday’s tragic terrorist attacks in Barcelona and Cambrills brought more geopolitical uncertainty to the market, pushing investors towards safe-haven assets. In just over 2-weeks, the gold price has gained momentum rising over 5% to £1005 an ounce. Silver has also made strong gains whilst the palladium price sits at a 16-year high of £720 an ounce, approaching parity with platinum.

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