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Safe-haven demand boosts gold price

Safe-haven demand boosts gold price

Gold prices are up 6% in the past month to a 12-month high and CommBank analysts have raised their short-term forecasts as a result.

Rising tension with North Korea has spurred demand for assets that investors think might be more likely to hold their value in the case of a global crisis.

Increased demand has pushed the gold price to trade as high as US$1,342.55 an ounce, the highest level for a year, according to Bloomberg data on 6 September, 2017.

CommBank analysts said in a report that “while the reliability of safe-haven demand translating through to higher gold prices is not consistent, we think that a non-financial risk event like a military conflict will be positive for gold”.

But signs that the US Federal Reserve might be more hesitant to accelerate any rate increases could also be a factor, CommBank said.

“We still believe that higher US rates will eventually weigh on prices early next year. But that doesn’t negate the surge in gold prices as markets price in North Korean tensions,” the report said.

Consequently, CommBank expects gold prices to average US$1,265 an ounce in third quarter 2017 and US$1,300 an ounce in fourth quarter 2017, up 3% and 7% on previous forecasts respectively.

For calendar year 2018, CommBank forecasts an average gold price of US$1,261 an ounce, up 3% on its previous forecast.

Watch the CommSec video for more insights about the gold price and the markets.

This article is intended to provide general information of an educational nature only. It does not have regard to the financial situation or needs of any reader and must not be relied upon as financial product advice. Investors should consult a range of resources, and if necessary, seek professional advice, before making investment decisions in regard to their objectives, financial and taxation situations and needs because these have not been taken into account. Any securities or prices used in the examples given are for illustrative purposes only and should not be considered as a recommendation to buy, sell or hold. Past performance is not indicative of future performance. The commentary provided from external companies that are not a member of the Commonwealth Bank of Australia Group of Companies (the CBA Group) does not represent an endorsement, recommendation, guarantee or advice in regard to any matter. Commonwealth Securities Limited ABN 60 067 254 399 AFSL 238814 (CommSec) is a wholly owned but non-guaranteed subsidiary of the Commonwealth Bank of Australia ABN 48 123 123 124 AFSL 234945 and a Participant of the ASX Group and Chi-X Australia.