Interest rates, residual factors, price momentum, geopolitical risk, economic expansion — if you can name it, it can probably influence gold prices.
A system created by the World Gold Council, dubbed the Gold Return Attribution Model (GRAM), can look back monthly and give investors insight into why gold prices moved the way they did, taking several factors into account.
Based on the latest release, which includes data through August, several key factors have led to gold’s price rise over the past six months.
What has changed?
One of the most notable items shown by GRAM that has morphed from a negative to a positive position over the six tracked months has obviously been the change in interest rates.
Many global banks are moving into economic easing cycles as fears about a downtrend mount. In June, interest rates went from being a negative to a positive and are likely to continue in that direction as the Federal Reserve is expected to make more cuts in the future.
On the flip side, the model shows that much of the momentum trading that drove the price higher in the earlier half of the year is beginning to show signs of fizzling out.
Though September’s GRAM data has yet to be released, it’s safe to assume geopolitical risks will help to offset some of the residual losses seen with the yellow metal.
A weakening dollar through August also helped to propel gold to its new all-time high.
Written by Tim Zyla
This article is for informational purposes only. The opinions and analysis herein are those of the author and are not financial advice. The Jerusalem Post (JPost.com) does not endorse or recommend any investments based on this information. Investors should consider their financial situation, investment goals, and risk tolerance before making any decisions. Consulting a qualified financial advisor is recommended. JPost.com is not liable for any investment losses from using this information. The information provided is for educational purposes only and should not be considered as trading or investment advice.
