Is gold finally having its moment? After languishing for most of the year, prices for the haven metal notched their biggest daily gain since June 2016 on Thursday, climbing 2.9% as global stocks extended their losses. Prices now stand at their highest level in two months, and some analysts believe they are bound to strengthen further. Gold bulls believe several factors could fuel a move higher. While Thursday’s gold rally was sparked by a move to haven investments during the stock selloff, it gained momentum after a lower-than-expected U.S. inflation reading weakened the case for the Federal Reserve to keep raising interest rates at its current pace. The Fed has been on investors’ minds even more than usual in recent days, as concerns over rising U.S. bond yields caused big selloffs in stocks around the globe. For gold, a more dovish Fed would likely be a good thing; the metal struggles to compete with yield-bearing investments when U.S. rates rise. Fed funds futures, which investors use to bet on the path of central bank interest-rate policy, showed the odds of policy makers raising rates three times by June 2019 declined to 33% from 41% late Wednesday. The odds of an increase in December slipped to 78% from 83% Wednesday. A slower pace of rate increases may also make the U.S. dollar less attractive to yield-seeking investors—another potential booster for gold, which is denominated in the U.S. currency and becomes more affordable to foreign investors when the dollar falls. The WSJ Dollar Index, which measures the U.S. currency against a basket of 16 others, was down 0.7%% in the past three days as of late Thursday. Gold is up 3.3%, after closing at $1,223.50 a troy ounce. Some investors believe gold will act more like a safe haven when it is no longer bound by concerns over a hawkish Fed and stronger dollar. That means gold could get a boost from worries traders have largely ignored in recent months, including the intensifying trade dispute with China. Are you a gold bull? Let the author know your thoughts at ira.losebashvili@wsj.com. Emailed comments may be edited before publication in future newsletters, and please make sure to include your name and location. |