Gold showed some strength on Friday as the U.S. dollar pulled back from recent highs. However, gold remained on track for a weekly decline as traders shifted their focus away from the widely anticipated Federal Reserve’s decision to pause interest rate hikes this month. Instead, they paid attention to consistently strong U.S. economic data.
Here are the key details:
- Spot gold increased by 0.3% to reach $1,924.98 per ounce by 0345 GMT, although it was still on course for a 0.7% weekly decrease. U.S. gold futures also rose 0.3% to reach $1,949.00.
- Some market participants are seeking alternative asset classes that offer higher returns, with the U.S. dollar appearing to fulfill that role at the moment, according to Brian Lan of GoldSilver Central in Singapore.
- Despite a 0.2% decline on the day, the U.S. dollar was heading for its longest weekly winning streak in nine years. This was bolstered by resilient U.S. economic data, which has raised questions about the conclusion of the Fed’s rate-hike cycle.
- Recent data indicated that the U.S. services sector gained momentum in August, and jobless claims unexpectedly fell to their lowest level since February, suggesting a tight job market.
- Markets have priced in a roughly 93% chance of the Fed maintaining interest rates at their current levels during its meeting on September 19-20. However, there is a 41% probability of one more rate hike before 2024, as per the CME FedWatch tool.
- Higher interest rates can increase the returns on safe-haven Treasury bonds, which have seen their first weekly rise in three weeks. This makes non-interest-bearing gold less appealing.
- Silver rose 0.6% to $23.08 per ounce, while platinum gained 0.2% to $905.34. Both, however, were on track for their worst weekly performances since June 23.
- Palladium increased by 0.6% to reach $1,218.77.
The dynamics of gold and other precious metals are influenced by various factors, including changes in the U.S. dollar’s strength, interest rates, and economic data, making them closely watched assets in global financial markets.
What happened to Gold historically?
Certainly, here’s the information presented in a continuous text format:
Gold has held a unique and enduring place in human history for millennia. It has been coveted, admired, and valued for its beauty, rarity, and intrinsic qualities. The history of gold dates back to ancient civilizations, believed to be first discovered in the Middle East’s rivers around 4000 BC. The Egyptians were among the earliest to mine and extensively use gold for artifacts and jewelry. Gold became a symbol of royalty and wealth in various cultures and was used to craft regal items such as crowns and thrones.
The 19th century saw the emergence of the gold standard, where many countries pegged their currencies to specific amounts of gold. Gold coins like the aureus were widely used during the Greek and Roman periods. In the late 19th century, stock markets, including the New York Stock Exchange (NYSE), began to develop.
Throughout the 20th century, gold remained significant, with events like the abandonment of the gold standard during World War I and its return in the 1920s shaping its role. The Great Depression and the 1929 stock market crash had considerable impacts on gold prices. World War II led to fluctuations as countries left the gold standard to finance the war.
Post-World War II, the Bretton Woods Agreement (1944) established fixed exchange rates with the U.S. dollar as the primary reserve currency, convertible to gold at a fixed rate. This system continued until 1971 when President Richard Nixon suspended the U.S. dollar’s convertibility into gold, ending the Bretton Woods system.
The 1970s saw significant gold price volatility due to economic uncertainty, inflation, and geopolitical tensions. Gold reached an all-time high in January 1980 at $850 per ounce. In the 21st century, gold regained popularity as a hedge against economic uncertainty and stock market volatility. The 2008 financial crisis and the COVID-19 pandemic led to substantial increases in gold prices, with record highs in 2020, exceeding $2,000 per ounce.
Gold’s relationship with the stock market has evolved, with it often seen as a safe-haven asset during stock market downturns. Investors often turn to gold during economic instability. There’s often an inverse relationship between stock market performance and gold prices, where gold performs well when stocks perform poorly and vice versa. Gold’s enduring appeal lies in its role as a store of value and investment asset, balancing risk and diversifying portfolios.
