HSBC: Low Interest Rates ‘Powerful Propeller For Higher Gold’

Friday June 10, 2016 09:03

HSBC sees potential for more near-term upside in gold, although analysts also caution that there is chart resistance around $1,300 an ounce. “Low interest rates are a powerful propeller for higher gold and while U.S. rates are the main focus of the gold market, global rates are also a factor driving gold prices,” the bank says in a late-Thursday research note. “U.K. and German sovereign debt yields fell to record lows, helping to fuel gold’s rally. Safe-haven and hedge-related buying ahead of the U.K. referendum on continued EU (European Union) membership is becoming more noticeable, with a portion of this demand being funneled into physical gold purchases in the EU.” The upcoming U.K. vote and next week’s meeting of the U.S. Federal Open Market Committee “loom large” for markets, HSBC says. “Near term, they are supportive of bullion. Beyond that, rates are low globally, which supports gold,” HSBC continues. “We detect increasing concern over the scale of bonds with negative yields. Negative yields may induce investors to go further out the yield curve in search of positive rates, penalize savers and raise concern over what might happen to investor portfolios were rates to start to rise. This is all positive for gold, and we expect it to remain so.”

By Allen Sykora of Kitco News; asykora@kitco.com