The price of gold rose to its highest level since November 2021 as the yields on U.S. treasury bonds fell and the U.S. dollar weakened. This rally in the price of gold was given added momentum by the increased volatility within equity markets. Throughout January 2022, the price of gold has largely remained above $1,800 per ounce. Despite the decision of numerous central banks to begin rolling back the stimulus measures instituted to cushion the harsh effects of COVID-19 on economies, gold remained strong on the market.
Concerns over the omicron variant coupled with the traditional view that gold has always been a hedge against inflation have all worked to keep the demand for gold high. Craig Erlam, an analyst at brokerage firm OANDA, says that the way traders are bullish about gold is a reflection of the traders’ views that central banks aren’t doing enough to tame inflationary pressures stemming from the excess amounts of cash pumped into economies to counter the hardships triggered by the pandemic.
Bloomberg Economics believes the Fed will implement an interest rate increase in March. While chances are high that the increase will be approximately one-quarter of a percentage point, swap markets have opted to make their calculations based on a higher rate hike, in excess of 25 points.
This anticipated upward adjustment of the interest rate has caused some technical indicators relied on by traders to signal the start of another bullish phase in the market for gold. However, experts say that a significant price jump is not likely, at least until the Fed meets next week and makes a formal announcement about the magnitude of the anticipated hike in interest rates.
The underwhelming data coming out about December home sales has also not helped matters. Statistics show that the rate at which home sales grew dropped by 4.6% when compared to the data for November. While the outlook for this year is positive, November numbers didn’t do much to attract investors away from gold.
It should also be noted that there are some geopolitical factors that are favoring a rally in the demand for bullion. For example, the tensions surrounding concerns that Russia may soon invade its neighbor Ukraine have cause jitters in the financial markets and triggered additional demand for gold.
What this means is that gold is likely to enjoy a positive run for quite a while, and this could be to the advantage of precious metals extraction firms like StraightUp Resources Inc. (CSE: ST) (OTCQB: STUPF).
NOTE TO INVESTORS: The latest news and updates relating to StraightUp Resources Inc. (CSE: ST) (OTCQB: STUPF) are available in the company’s newsroom at https://ibn.fm/STUPF
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