uploads///Gold Price Versus US Two and Ten year rate of Interest

What’s Supporting Gold Prices and What’s Not



Double-edged sword

On Thursday, silver was up 0.8% to $16.6 an ounce. Platinum climbed about 0.95% to $907.4, while palladium fell 0.5% and was trading at $972 an ounce. Another element that could have possibly boosted gold prices is the forward-looking estimates of higher inflation. The Fed’s assertion that it would let inflation (TIPS) move above its target of 2% is positive for gold. Gold is often considered to be a hedge against inflation. Similarly, during times of unrest, gold acts as a buffer amid rising prices. Another factor that could pull gold lower is the higher interest rates. It looks almost certain that the Fed will hike rates in June 2018.

Higher rates offered on Treasuries lessen the demand for non-yield-bearing assets, as gold doesn’t generate intermediary cash flows. The below chart prices gold (IAU) against the US two-year and ten-year interest rates (SHY) (IEF).

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South African miners keep falling

The falling gold prices in 2018 have been detrimental to many mining companies. AngloGold Ashanti (AU), the world’s third-largest gold miner based out of Africa, will be cutting almost one-third of its workforce in South Africa as it struggles with the rand and dropping gold prices. AU has fallen 13.9% over the last three months. Some of the South African miners that have also fallen over the previous month include Sibanye Gold (SBGL) and Gold Fields (GFI). They were down 33.9% and 8.6%, respectively, over the last three months.


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