The price of gold remained unchanged as the week began, after it experienced a brief drop below $3300 an ounce in the last few days. Similarly, the precious metal’s price in euros and pounds dropped slightly to €2902 and £2443 per ounce, respectively.
With immigration raids progressing across the country and concerns about America’s budget deficit growing, traders and investors are awaiting results from this week’s scheduled auction of Treasury bonds to get a feel of the market’s demand for America’s debt.
UBS Head of G10 FX strategy, Shahab Jalinoos, explains that the dollar may weaken even as bond yields rise due to the risk attached to U.S. debt. He added that the pattern of a falling currency and dropping bond prices is normally observed in emerging-market economies. Spot gold rose to $3321 per Troy ounce at the start of the week after a slight drop from the $3403 it recorded after release of strong U.S. employment data.
Chief director and precious metals specialist at the Japan Bullion Market Association, Bruce Ikemizu, argues that the fact that the metal’s price remained above $3300 and its demand is still rising suggests that purchasing interest in gold, particularly from Central Banks, remains strong. This may explain why the People’s Bank of China continued to expand its gold bullion reserves. The bank’s official holdings currently stand at 2296 tons, making it the sixth-biggest sovereign gold reserve worldwide.
Globally, central banks are on course to buying 1000 gold tons for the 4th year in a row as countries strategically shift toward non-dollar denominated assets.
Philip Newman, MD at Metals Focus, argues that gold’s demand will stay firmly backed by the ongoing political tensions and economic uncertainty attached to U.S. policy, noting that the precious metal’s price has already risen by about one-third.
This sentiment is shared by Metals Focus, which predicts that the drivers facilitating the precious metal’s rally will last through the year, raising gold’s average price for the year to $3210 an ounce. This is gold’s 6th consecutive record high and represents a 35% increase.
Meanwhile, silver prices have hit decade-highs, with the metal’s price reaching $36.22 per Troy ounce. Palladium has also seen its price surge to $1075 an ounce, representing a 2.4% increase. Primary demand for this metal comes from auto-catalysts. Additionally, platinum’s price has increased by 2.8%, driven by rising demand for its use in catalytic converters in fossil-fuel vehicles.
As these market conditions persist, entities like Platinum Group Metals Ltd. (NYSE American: PLG) (TSX: PTM) stand a higher chance of meeting their investors’ expectations in terms of ROI.
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