Gold prices today (Friday) climbed $18.90, or $1.66%, to $1,158.90, which was a six-week high for the precious metal.
Gold prices today climbed after the release of the latest Federal Open Market Committee (FOMC) minutes. The minutes were clearly dovish, with many now believing an interest rate hike won't happen until 2016.
Minutes from the U.S. Federal Reserve's Sept. 16-17 meeting showed policy members are still concerned with low inflation and the growing threat of an economic slowdown in China. The FOMC minutes also showed all but one member concluded that economic conditions didn't warrant an interest rate hike.
Given the Fed cited global weakness as reason enough to keep interest rates near zero, the Fed's delay could be longer than initially anticipated, given sputtering economic conditions worldwide.
Like most commodities, gold is priced in U.S. dollars. Since rising interest rates increase the value of the dollar, gold becomes more expensive when rates are hiked. Low interest rates typically send gold prices higher.
Also boosting gold prices today was news that commodities are on pace to close out the week with the biggest weekly gain since 2012. Pacific Investment Management Co. (PIMCO) added that the worst of the collapse in commodity prices is likely over. The Bloomberg Commodities Index advanced 4.4% this week.
Here's what investors can expect from the price of gold in the months ahead...
Gold Prices Climb Today, Will Continue Higher
Global investment bank UBS expects gold prices to rebound into 2016 amid a low interest rate environment.
"We maintain our core constructive view, expecting gold to stabilize and eventually recover up ahead," UBS said in an outlook issued Friday. "We think that gold has already done a lot to adjust to the current macro environment and anticipate further changes. We expect any downside from here to be ultimately contained."
Expectations for rising interest rates have pressured gold prices throughout 2015. But UBS said the Fed's commitment to remain accommodative and move slowly after an initial hike means a more friendly landscape for gold than what's priced into the market now.
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Money Morning Resource Specialist Peter Krauth agrees.
"The Fed indicated that weakness in the global economy caused its participants to vote against a rate hike," Krauth said. "But if that weakness persists, it could keep the Fed from any kind of significant rate increase for some time."
"And that could continue to bolster gold and gold equities and send prices higher," he continued. "After four years of correcting and forming what looks like a double bottom around the $1,100 mark, gold seems ready to resume its long-term secular bull market."
Gold has long been deemed the ultimate safe-haven asset, risk-adverse trade, and inflation hedge.
With global economic conditions expected to remain fragile in the months ahead, inflation likely to heat up, and geopolitical issues always a concern, the case for gold remains solid.
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