Gold made a new six-year high of $1,453 per ounce on July 19 with further dovish comments from Federal Reserve Bank of New York chief John C. Williams and U.S. Fed Vice Chairman Richard Clarida who talked of deflationary pressures and made aggressive comments on rate cuts.

Gold Price (2019)

Source: Bloomberg.

Not deterred by the U.S. dollar, gold ended July at the top of its recent range. Interest rates, rather than the dollar, have become the primary driver for gold. Real rates (adjusted for inflation) are near zero, or negative, for over half of the debt outstanding globally. With rates so low, in addition to its qualities as a store of wealth, gold becomes competitive with interest-bearing investments. If, as in the past cycles, this cycle ends in recession, risks could emerge which drive gold price much higher.

About the Author:

Joe Foster has been Portfolio Manager for the VanEck International Investors Gold Fund since 1998 and the VanEck – Global Gold UCITS Fund since 2012. Mr. Foster, an acknowledged authority on gold, has over 10 years of dedicated experience in geology and mining including as a gold geologist in Nevada. He has appeared in The Wall Street Journal, Barron's, and on Reuters, CNBC and Bloomberg TV. Mr. Foster has also published articles in a number of mining journals, including Mining Engineering and Geological Society of Nevada.

The article above is an opinion of the author and does not necessarily reflect the opinion of MV Index Solutions or its affiliates.