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Consolidation for now – with uncertainty a constant

The gold price had a warm and sunny June: it went up by almost 13%, hitting on 25 June an intra-day high of $1440/oz. Speculative investors in the futures market significantly increased their bullish positions over the month. As many of such investors are looking for swift, short-term gains, it is inevitable that some have decided to take profits, so the price has come down a little. But the factors that underlie its recent rise are all still in place, and they can be summed up in one word – uncertainty. The combination of falling Bond yields and the possibility of lower US interest rates (and thus a potentially weaker dollar) continues to make gold a very attractive investment. The US Federal Reserve is putting out lots of signals that an interest rate cut is imminent; the Bank of England’s Governor, Mark Carney, said this week that “intensification of trade tensions has increased the downside risks to global and UK growth”, Governor-speak meaning ‘no interest rate rises for now’, and the European Central Bank is in a quandary about what to do to get the Eurozone economy out of its sluggishness. One thing is certain – the ECB will end up doing fresh quantitative easing, i.e. printing more banknotes. The chart below shows the gold price in US dollars set against the open interest established by the US Commodity Futures Trading Commission (CFTC);  increasing open interest represents new or additional money coming into the market. ‘Open interest’ is a reflection of investor interest in a particular market.

All in all this is a particularly supportive background for gold not just for the short but also the longer term. It’s time you downloaded Glint and started buying, saving, and spending gold.

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