Gold prices rose last week to a new record high, as concerns over the outlook for global growth and rising fears that the European debt crisis will spread into Italy and Spain, sparked fears across global financial markets and increased demand for safe assets, which boosted gold prices and sent them above $1680 an ounce for the first time ever.
Data from the United States proved mostly disappointing, as it signaled economic activities in the manufacturing and services sectors slowed down in July, which led to speculations that the U.S. economy could be heading into a double dip recession, and that boosted demand for gold, while news emerged that central banks around the globe are increasing their gold holdings, which also provided gold prices with strong bullish momentum.
Moreover, investors are still concerned that the European debt crisis will spread into Italy and Spain, the Euro Zone’s third and fourth largest economies respectively, as yields on Italian and Spanish governmental bonds rose to the highest level in more than a decade, and that further boosted demand for gold as a safe haven.
Gold prices are most likely to continue their bullish trend over the coming period, especially since the level of uncertainty remains unusually high, as beyond the debt crisis in Europe and the United States, the uncertainty surrounding the outlook for global growth is also very high, and that could further boost demand for safe havens including gold.
Despite the better than expected jobs report from the United States last week, yet the overall economic weakness remains the dominant theme for global economies, and that will most likely play a role in directing investors towards gold as a safe investment over the coming period.
Complied by Mitesh Rasaikar, CEO (Marketing & Finance), Maya Iron Ores