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| Gold hits six-year high as rate cut hopes and US-Iran tensions grow - business live | Gold hits six-year high as rate cut hopes and US-Iran tensions grow - business live |
| (31 minutes later) | |
| Gold struck its all-time high back in 2011, after the financial crisis, when it peaked over $1,900. | |
| We’re nowhere near those levels yet, but Fawad Razaqzada, market analyst at Forex.com, suspects bullion will keep rising through 2019. | |
| He cites the weakening US dollar (which pushes up commodity prices) and the fact that bonds provide so little income at present. | |
| The underlying trend is bullish for gold and silver, due to the falling government bond yields and the recent struggles for the dollar and stocks. So, as things stand, these are good times for buck-denominated and noninterest-bearing precious metals. | |
| Stock markets are taking a cue from gold this morning, with gains across the globe. | |
| Japan’s Nikkei has jumped 2%, and China’s CSI 300 index gained 1%, on hope of a US interest rate cut soon. | |
| In London, the FTSE 100 has jumped by 48 points, or 0.6%, to 7,543. | |
| Global mkts switch into Risk On mode as Fed props up rate cut expectations and on better tech earnings. Bets rise on 50 bp reduction in Jul w/ dovish comments from Fed's Williams. US yields fall, Gold hits 6y high. Oil bounces after US Navy destroyed Iranian drone. Bitcoin >10k. pic.twitter.com/kTKTK4uQDY | |
| Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. | Good morning, and welcome to our rolling coverage of the world economy, the financial markets, the eurozone and business. |
| Gold, that perennial barometer of investor nervousness, has hit a six-year high today. | Gold, that perennial barometer of investor nervousness, has hit a six-year high today. |
| Bullion jumped through $1,450 per ounce for the first time since May 2013, extending its recent gains. | Bullion jumped through $1,450 per ounce for the first time since May 2013, extending its recent gains. |
| This means gold has now surged by 25% since last August, a sparkling run that outpaces most other assets. | This means gold has now surged by 25% since last August, a sparkling run that outpaces most other assets. |
| The rally is being driven by several factors. One is that America’s central bank seems certain to cut interest rates later this month. That would be inflationary -- and gold is seen as a store of value in such times. | The rally is being driven by several factors. One is that America’s central bank seems certain to cut interest rates later this month. That would be inflationary -- and gold is seen as a store of value in such times. |
| There’s even chatter that the Federal Reserve could slash borrowing costs by half a percentage point, rather than the typical quarter-point cut. | There’s even chatter that the Federal Reserve could slash borrowing costs by half a percentage point, rather than the typical quarter-point cut. |
| John Williams, the vice chairman of the Fed’s policy-setting board, raised these rate cut hopes on Thursday when he said policymakers need to be pro-active, rather than waiting for a disaster to unfold. | John Williams, the vice chairman of the Fed’s policy-setting board, raised these rate cut hopes on Thursday when he said policymakers need to be pro-active, rather than waiting for a disaster to unfold. |
| Comparing monetary policy to vaccination, Williams said: | Comparing monetary policy to vaccination, Williams said: |
| It’s better to deal with the short-term pain of a shot than to take the risk that they’ll contract a disease later on.” | It’s better to deal with the short-term pain of a shot than to take the risk that they’ll contract a disease later on.” |
| Gold’s popularity also comes as government bond prices surge to record highs. Many are now trading with negative yields, meaning investors are guaranteed to lose money if they hold the debt until it matures. Gold doesn’t pay a dividend or a coupon, but can still deliver a profit if prices keep rising. | Gold’s popularity also comes as government bond prices surge to record highs. Many are now trading with negative yields, meaning investors are guaranteed to lose money if they hold the debt until it matures. Gold doesn’t pay a dividend or a coupon, but can still deliver a profit if prices keep rising. |
| Gold is also popular when geopolitical tensions escalate. The news that America says it has shot down an Iranian drone over the Strait of Hormuz yesterday (which Tehran denies) has worried investors, given recent attacks on oil tankers in the Gulf region. | |
| I want to apprise everyone of an incident in the Strait of Hormuz today, involving #USSBoxer, a U.S. Navy amphibious assault ship. The BOXER took defensive action against an Iranian drone.... pic.twitter.com/Zql6nAUGxF | I want to apprise everyone of an incident in the Strait of Hormuz today, involving #USSBoxer, a U.S. Navy amphibious assault ship. The BOXER took defensive action against an Iranian drone.... pic.twitter.com/Zql6nAUGxF |
| Nicholas Frappell, global general manager at ABC Bullion, says gold was further lifted by Iran announcing the capture of a foreign oil-smuggling tanker in the Gulf: | Nicholas Frappell, global general manager at ABC Bullion, says gold was further lifted by Iran announcing the capture of a foreign oil-smuggling tanker in the Gulf: |
| “The extra push for gold prices came from comments by NY Fed President John Williams which implied quite aggressive rate-cutting, plus the Iranian drone news and the seizure of a tanker by the Iranians in the Straits of Hormuz.” | “The extra push for gold prices came from comments by NY Fed President John Williams which implied quite aggressive rate-cutting, plus the Iranian drone news and the seizure of a tanker by the Iranians in the Straits of Hormuz.” |
| Iran says it has seized foreign oil tanker in Gulf | Iran says it has seized foreign oil tanker in Gulf |
| More to follow... | More to follow... |
| Also coming up today | Also coming up today |
| We learn how much Britain borrowed to balance the books last month, plus get a new gauge on American consumer confidence. | We learn how much Britain borrowed to balance the books last month, plus get a new gauge on American consumer confidence. |
| The agenda | The agenda |
| 9.30am BST: UK public finances for June (£3.9bn deficit expected) | 9.30am BST: UK public finances for June (£3.9bn deficit expected) |
| 3pm BST: University of Michigan’s survey of US consumer confidence | 3pm BST: University of Michigan’s survey of US consumer confidence |