Real interest rates remain firmly in negative territory, a fact that continues to augur well for gold prices

The gold price support on Tuesday morning as investors shifted funds into equities on the hope that the stock market’s recent correction is over. The price of gold support at 19.38 to $1,766.30 per ounce and now trades $48 lower than its record high of $1,815 per ounce, posted on August 11. Weakness in the U.S. dollar, which fell against the euro and Australian dollar, failed to bolster gold this morning. Oil climbed 0.3% to $85.66 per barrel while silver advanced $0.17 to $39.27 per ounce.

With equities undergoing quite the rollercoaster ride, U.S. Treasuries continued to serve as one the primary safe havens alongside investments tied to the gold price. The ten-year yield tumbled from 2.56% to as low as 2.09%, its lowest level since December 2008. Real interest rates remain firmly in negative territory, a fact that continues to augur well for gold prices.

Bill Fleckenstein, a prominent investor and long-time bull on the gold price, summed up the bond market’s movements by writing on Minyanville.com that “The perverse fact of the matter is, it doesn’t seem to matter how out of control your government is, if you have a printing press, your debt is sought after. Look at Japan and look at us (the United States). Some day that won’t be the case, but for now the explanation is that, in the short run, people just want to get their colored paper back, even if it is slowly going to disintegrate over time.”

Steven Harris, analyst with Macquarie Capital Markets, highlighted last week’s Federal Open Market Committee meeting as a positive catalyst for the broader equity markets, as well as for gold and investments tied to the gold price.


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