The Globe and Mail reports in its Friday, June 21, edition that gold prices surged to a near six-year high on Thursday after the United States Federal Reserve signalled it is ready to cut interest rates as early as next month to boost growth. A Reuters dispatch to The Globe reports that spot gold jumped 2.2 per cent by midafternoon after prices touched $1,392.84, their highest since early September, 2013 (all figures U.S.). U.S. gold futures settled 3.6 per cent higher at $1,396.90 an ounce. Lower interest rates decrease the opportunity cost of holding non-yielding bullion and weigh on the U.S. dollar, making gold cheaper for investors holding other currencies.
The Fed on Wednesday signalled interest-rate cuts could begin as early as July, saying it is ready to battle growing global and domestic economic risks as it takes stock of rising trade tensions and growing concerns about weak inflation. UBS analysts say: “Gold has been supported of late by trade and growth uncertainties, which weakened the U.S. dollar, caused bonds to rally and spurred equity market volatility. The Fed’s dovish pivot on interest rates has pushed the goldprice to a 5-year high and toward the $1,400/oz mark.”