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Gold price hiccup not enough to derail bullish momentum

March 16, 2022

Gold price hiccup not enough to derail bullish momentum

Gold prices eased this week and US Treasury yields climbed to their highest levels in almost three years, but experts still expect further gains for the yellow metal.

Gold prices eased this week and US Treasury yields climbed to their highest levels in almost three years, but experts still expect further gains for the yellow metal.

The precious metal dropped below US$1960 this week as peace talks in Europe curtailed demand for safe-haven assets and looming rate rises pushed 10-year US Treasury yields to 2.145%.

It is the highest yields on those securities since July 2019, and the increase comes as the board of the US Federal Reserve meets to discuss the cash rate – with analysts expecting a 0.25% increase to be announced on Wednesday (US time).

This weighed on gold-exposed equities, too – the ASX All Ordinaries Gold index dropped back 3.22% during trading on Tuesday and suffered another sell-off in early trade on Wednesday.

Even so, rising inflation and a growing ‘risk-off’ sentiment in markets as the crisis in Europe develops both make convincing cases for further growth in gold’s longer-term outlook, according to Bloomberg Intelligence senior commodity strategist Mike McGlone.

Mr McGlone expected most metals – many of which rallied in the wake of Russia’s invasion of Ukraine – could see prices revert lower after elevated high prices led to a period of demand destruction.

Nickel, aluminium, palladium and copper are all likely to see this play out as the year progresses, Mr McGlone said. 

“The one metal I expect to be higher is probably gold, because it looks like we’re headed towards a recession,” he said.

With Russia looking increasingly likely to default on its foreign debts and the International Monetary Fund warning contagion could lead to recession, Mr McGlone said gold prices could hit US$2500 per ounce by the year’s end and “refresh an enduring bull market” for the metal.

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Please note:

  • The securities on offer are issued by Far East Gold (ACN 639 887 219 )
  • The Prospectus is a replacement Prospectus dated 1 December 2021. It replaces a Prospectus lodged by Far East Gold with ASIC on 17 November 2021. The offer is available and can be obtained by clicking on the button above.
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The shares offered by this prospectus should be considered highly speculative. An investment in the company is not risk free and potential investors need to consider the risk factors described in the prospectus and to consult their professional advisers before deciding whether to apply for shares. As per the prospectus ASIC, the ASX and their officers take no responsibility for the contents of the prospectus or the merit of the investment to which this prospectus relates.

 

Sources


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