Gold futures were on the rise Tuesday, trading near a three-week high above $1,800 amid reports that buying demand for bullion was gathering steam particularly among central banks.
About one in five global central banks intend to increase their gold reserves over the next year, wrote Bloomberg News, in a report citing a survey conducted by the World Gold Council published last month.
August gold GCQ21,
Silver contracts for September delivery SI00,
U.S. financial markets were closed Monday in observance of the Fourth of July holiday, Independence Day, which fell on a Sunday this year.
Prices for precious metals were on the rise recently as the price of the U.S. dollar has softened a recent rise and as yields for Treasuries have been in retreat. A weakening dollar can make dollar-price commodities more attractive to overseas buyers and lower yields are a boon for bullion because government debt can compete against precious metals as a safe-haven as they don’t offer a coupon.
“Gold prices just passed their own technical test with flying colors, punching above the crucial $1795 region with force,” wrote Marios Hadjikyriacos, investment analyst at XM in a daily research note.
Hadjikyriacos, however, warned that “cheap money and a struggling dollar are necessary for gold to flourish,” which could come undone as members of the U.S. central bank have been talking more of raising interest rates and tapering other measures of easy-money policies, including asset purchases, by the start of next year.
