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WSJ: Investors Flock to Precious Metals Amid Negative Yields

WSJ: Investors Flock to Precious Metals Amid Negative Yields

Friday, 06 September 2019 08:15 AM

Investors reportedly are pouring money into precious metals at the fastest pace in years amid a plunge in global bond yields that has fueled a search for assets that can hold their value during troubled times.

Gold purchases by everyone from central banks to retail buyers have boosted the metal to its highest level in six years, with a coterie of famous investors now touting its role as a haven from market turmoil, the Wall Street Journal reported. Silver and platinum have outpaced all other major asset classes so far in the third quarter, while palladium is up about 30% this year, WSJ.com explained.

Instead, a deepening trade war between the U.S. and China has weighed on the outlook of nearly every major economy, adding pressure on many central banks to further cut rates—even those that already stand below zero.

Spot gold was down 0.9% at $1,505.41 per ounce as of early Friday, having shed as much as 1% earlier in the session, and retreating from an over six-year peak of $1,557 touched on Wednesday. U.S. gold futures slid 0.8% to $1,513.80, Reuters reported.

Meanwhile, gold will surge above $1,600 an ounce as the Federal Reserve embarks on a quartet of interest rate cuts to combat slowing U.S. growth and the fallout from the trade war with China, according to BNP Paribas SA, which flagged prospects for a significant rise in prices in the coming months.

Bullion will benefit as the Fed opts for four, 25 basis point cuts between this month and June 2020, Harry Tchilinguirian, head of commodity research, said in a note. As nominal yields fall with each reduction, “real rates will move and stay in negative territory, raising the appeal of holding gold,” he was quoted by Bloomberg as saying.

Gold has soared this year on increased demand for havens as the U.S.-China trade war damages global growth, prompting central banks including the Fed to adopt a more accommodative stance. In July, U.S. policy makers reduced borrowing costs for the first time in more than a decade, and they are widely expected to do so again at their Sept. 17-18 meeting. Against that backdrop, investors have boosted holdings in bullion-backed exchange-traded funds.

“The trade war is unlikely to be resolved quickly,” Tchilinguirian said. “In this context, gold has resumed its traditional role as a safe-haven asset” and holdings in ETFs are now heading toward peak levels seen in 2012, he said as BNP boosted price forecasts for this year and next.

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Investors reportedly are pouring money into precious metals at the fastest pace in years amid a plunge in global bond yields that has fueled a search for assets that can hold their value during troubled times.
investors, precious, metals, negative, yields
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2019-15-06
Friday, 06 September 2019 08:15 AM
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