“Autumn carries more gold in its pocket than all the other seasons.” - Jim Bishop
Today is October 1st, and Autumn is most definitely in the air, or ‘fall’ as our American friends like to call it, but the golden autumn leaves are not the only thing that appear to be ‘falling’ at the moment: our other friend, gold, has been heading downwards over the last few months.
Last week, the US Federal Reserve announced another rise in interest rates – taking it up from 2% to 2.25% - the fifth rise in rates since President Trump came to office. The Fed also said the US could even see four more increases by the end of 2019 and maybe more going into 2020.
The US economy seems to be rosy for the moment, with economic growth steady and the job market strong, and the dollar holding firm and even making gains compared to other currencies.
But what does this mean for the future of our favourite precious metal?
Higher interest rates are great for savings rates, and the Dollar’s increased value could attract foreign investment, which at first sounds like great news for the USA. But of course, this could also have a downside. Higher interest rates mean more expensive loans as repayment costs go up, which in turn could mean economic slowdown for the USA as investors take their money elsewhere. If the Fed just keep on hiking, could this possibly be setting up the US economy for a future recession?
Gold prices dipped a little again this morning, as the dollar firmed in the wake of this hike in interest rates. But with all this, as well as the current uncertainty surrounding Brexit, could this mean that precious metals are due for a comeback?
Globally, we are in uncertain times. Factors such as trade wars, Brexit, and the US interest price hikes continue, and history shows that these factors often prove beneficial for the gold price. Could this mean we are in for an upturn?
As always, the geopolitical risks we are all subject to are unquantifiable and often unpredictable, so for now, here we sit, somewhere between the sunny days of summer and the cold of winter, when the leaves are down, and the harvest is in. It seems we may just have to wait it out and see.
And, as always, only time will tell.
This blog represents one person’s opinion only. Customers should conduct their own research and take advice before making an investment. We do not offer investment advice.