Gold Price

Gold Jumps On Global Ultra-Low Interest Rates, Coin Premiums Surge

Written by Economic Calendar     July 29, 2016    

Gold prices were trading higher on Friday, as investors flocked back into the metal amid a flight-to-safety after the US Commerce Department reported a disappointing read on Q2 GDP growth.

Gold prices were trading higher on Friday, as investors flocked back into the metal amid a flight-to-safety after the US Commerce Department reported a disappointing read on Q2 GDP growth. The GDP reading was especially surprising considering it came just two-days after the US Federal Reserve offered a fairly upbeat opinion on the health of the US economy.

Gold futures for December delivery were slightly higher on Friday, boosted by expectations for prolonged, low interest rates along the world. On Thursday, gold futures jumped to a two-week high, buoyed by the US Fed’s announcement after gold trading on Wednesday that it would maintain its ultra-low interest rates.

Upside has continued on Friday, not only following the US’s disappointing Q2 GDP reading, but following the Bank of Japan’s decision to keep its benchmark negative interest rates and bond-buying program unchanged. There is no indication that the trend toward negative interest rates around the world will change anytime soon, and this is supportive for gold.

The spot premium on gold coins has moved up significantly over the past week. American Gold Eagle coins were selling for $1,395.80 on Friday, above the spot-price of gold of $1,335.69 per ounce, for a premium of $60.11 up from last Friday’s $51 premium. In light of concerns over the implications of ultra-low interest rates; it makes sense for investors to look to gold as a store for wealth. Gold coins are attractive to a wide range of investors because they are physical gold, and are significantly more obtainable than gold bars.

With gold fractionally higher on Friday it was still on track for its highest settlement since July 11. Over the week the commodity was up 1.5%. Friday is the last day of July trade and the commodity was set to close up 1.6%. The next upside target is seen at $1,400 per ounce.