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Gold rallies further as interest rate talk fades

Gold rose on Tuesday as investors decided the prospect of a rate rise may have been put back possibly into 2017.

picture of gold bars
ETF demand is proving resilient

Gold rose on Tuesday as investors decided the prospect of a rate rise may have been put back possibly into 2017.

Weak US GDP data late week  and lower equity markets today sent the spot gold price up to US$1,365.

Weakness in the dollar, gold’s traditional hedge, also helped as did more buying from holders of exchange traded funds.

According to Commerzbank, ETF holders bought 8.4 tons of gold yesterday, the highest in three weeks and fourth day of inflows in succession.

Holdings in the main gold ETFs are at their highest level in over three years, it said, which has offset weak demand for physical gold especially gold coin sales.

Physical demand has been in the doldrums for some months with the latest news from India containing few signs that the appetite for the metal is returning.

Indian gold bar imports dropped by 62% from a year ago according to customs data in July, though overall there was a slight uptick in imports.

Discounts to the spot price are said to be running at record levels following a spike in the price after the Brexit vote.

Commerzbank does not expect too much impact on the gold price, even so with investment demand so strong.

 “In view of the continuing low interest rate environment and amid numerous political risks, gold should remain in demand among investors.

“What is more, the monetary policy pursued by many central banks remains very loose – or is being loosened even further, as has happened today in Australia.”

A couple of hours into US trading, spot gold was US$14 higher at US$1,367. Platinum gained US$15 to US$1,170 and silver rose again to US$20.67.

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