Priority: Interest In Gold Surge After Australia Cuts Interest Rate To Historic Low

Priority: Interest In Gold Surge After Australia Cuts Interest Rate To Historic Low

Gold and SPDR Gold Trust (ETF) (NYSEARCA:GLD) prices are rising in European trading after earlier gains in Asia. The appetite has returned for gold after the Reserve Bank of Australia trimmed lending rates to a record low of 1.5%.

The lower interest rate is expected to spur economic growth. But it also tells investors of a potentially prolonged period of global economic uncertainty, thus the interest in safe-haven assets such as gold.

Gold futures for December delivery were had attained a session high of $1,367.65 a troy ounce in early morning of trading in Europe. Earlier in Asia, gold gained 0.00%.

Focus on U.S. economic data

Traders are also buying gold ahead of the release of data relating to U.S. personal income and spending for the month of June. Other economic data such as nonfarm job numbers are also expected out later this week.

The U.S. economic data should provide investors with clue about possible path to interest rate review by the Fed. Bullish data should provide an incentive for the central bank to hike lending rates, while softer economic data would likely mean a more gradual path to interest rates review by the Fed.

The uncertainty over what to expect from the U.S. economic data has weakened the dollar a bit, making dollar-denominated gold cheaper for traders holding rival currencies. The environment of lower interest rates also favors investing in safe-haven assets such as gold as yield-bearing assets such as bonds and equities become less attractive.

China’s crackdown on speculative trading can also be seen driving interest in gold.

Gold up 26% in 2016

Gold prices rallied up in the wake of the Brexit vote, but pared gains as global economies stepped up their monetary easing efforts to avoid economic catastrophe. So far in 2016, gold prices are up almost 26% relative to the same period last year. Gold surged to a 30-year high in the first quarter amid mixed U.S. economic data and economic slowdown in China.