Can Gold Keep Rising?

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Gold appeared to behave well in Asian trading on Friday following Thursday’s pullback. The growing possibility of the Fed raising interest rates doused appetite for gold as investors turned attention to yield-bearing assets. The gold market generally flourishes when interest rates are low and that explains why gold prices recently got hit following the release of the Fed’s minutes for their April meeting at which officials set sight on June and July for possible rate increases.

On the New York Mercantile Exchange’s Comex division, the price of gold futures for June delivery held steady at $1,255.35 during Asian trading hours. Gold for June delivery pulled back 1.54% to $1,254.80 in Thursday’s session.

Fed minutes

The Fed’s April meeting discussed possible interest rate hikes in the second half of 2016. According to the minutes, the officials appeared to favor making a rate increase move in either June or July if economic data showed that the U.S. economy was picking up pace. The release of the minutes strengthened the dollar, making dollar-priced commodities such as gold expensive in the eyes of buyers holding currencies other than the USD. Additionally, the minutes generated appetite for equities and other yield-bearing assets, thus leaving gold in the cold.

Gold prices have rallied up in recent months as investors seek cover in safe haven assets amid growing uncertainty over Fed interest rate increases. Fallout in oil and the iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL) caused by an oversupply situation that damaged prices also helped to lift up gold prices. But growing hope that major oil producers meeting next month would agree to freeze production has helped stoke interest in oil-based investments, hurting gold prices in the process.

Gold maintains gains

Despite the recent pressures on gold owing to a growing possibility of interest rate hikes and recovery of oil prices, gold prices remain up 19% so far in 2016. A missed Fed interest rate hike in July could once again trigger interest in gold.

Silver contracts for July delivery rose 0.28% in Asian trading to $16.540 a troy ounce. Likewise, copper contracts for July delivery edged up 0.49% to $2.070 a pound.

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