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Gold Gaining At The Expense Of Oil, Cloudy Interest Rate Pathway

Investors are returning to gold and the SPDR Gold Trust (ETF) (NYSEARCA:GLD) after the U.S. Federal Reserve failed to provide a clear path to interest rate hikes this year. Growing fears of another round of crude oil price slump following reports of higher gasoline inventory in the U.S. is another reason investors are trying to play safe.

Gold futures for December delivery spiked to a session high of $1,350.35 in the early morning hours of European trading. The price of the yellow metal was seen rising 0.14% at around 08:20GMT.

Gold prices also lifted about 0.86% in Asian trading earlier in the day to trade at $1,346.05 a troy ounce.

Other precious metals

Investors were also seen with appetite for other precious metals such as copper and silver. The prices of silver contracts for September delivery rose 2.3% to $20.46 a troy ounce in morning trading in London and copper contracts for September delivery rose 1.1% to trade at $2.208 a pound during the same morning hour trading.

Appetite for safe-havens

Though the Fed said that near-term risks to the U.S. economy had diminished, the central bank failed to make a firm commitment to raise interest rates any time soon. The dollar weakened against a basket of major rivals including yen following the Fed’s cloudy stand on the future of interest rates.

Lower interest rates favor gold trading because it douses investor appetite for yield-bearing assets. A weaker dollar also makes dollar-priced gold cheaper for foreign investors holding currencies other than the greenback.

The sliding crude oil and the iPath S&P GSCI Crude Oil Total Return (NYSEARCA:OIL) also appeared to inspire defensive trading among many investors, thus driving demand for gold and other safe-havens. Crude oil contracts for September delivery fell to a session low of just $41.86 a barrel.

The shock in the oil market has come from a rising number of active rigs and expanding crude oil stockpiles in the U.S. It was revealed that crude oil inventories in the U.S. increased by 1.7 million barrels in the last week, a sign that another round of a supply glut was building up.

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