What factors will support the price of gold now?

Recently, the price of gold has been able to fix well above $1,700 per ounce. Based on the euro, gold also held at least slightly above that level. On Monday, one troy ounce was worth $1,757 or EUR 1,704 on the spot market. At the same time, silver was worth $21.46 or €20.81 an ounce.

What factors can potentially affect the precious metals market in the next few days? New economic data from China will be released on Tuesday morning, with industrial production, retail sales and unemployment data for October to be announced. Now that a slightly smaller US interest rate hike is priced in, investors can turn their attention to China. The main question is, will the country loosen its tight C19 restrictions, which are also a burden on Western industrialized countries, and if so, when?

Wednesday will bring more economic data out of the US: October data on retail sales, import/export prices and industrial production. This will be followed on Thursday by data from the US housing market (the start of housing construction and building permits in October), as well as weekly data on the labor market and the Philadelphia Fed index.

On Friday, ECB President Christine Lagarde will deliver a keynote speech at the European Banking Congress in Frankfurt. In addition, a series of public appearances by high-ranking US Federal Reserve officials have been announced this week that could set stocks and the price of gold in motion. What's more, on Tuesday and Wednesday, Michael S. Barr will be speaking before the US Congress. He is Vice Chairman of the Fed's Supervisory Board.

Now the price of gold should be fixed above the level of 1700 euros, so that the recent rally does not turn out to be just a “flash in the pan”. Precious metals have recently recovered along with stock indices. A real reorientation of investors could disrupt this correlation. For example, an uptrend in the gold market can attract a large number of long speculators.

And at some point, the fiscal consequences of the crisis bailout will once again be more strongly reflected in the investment decisions of institutional investors, as the cost of government funding remains high (bond yields). A sovereign and currency crisis, as in the Eurozone until 2012, cannot be ruled out. The real estate market in the US and Europe is in an unstable state. New crisis scenarios like this are likely to lead to a "revaluation" of gold sooner or later.

USA

As it became known recently, gold production in the US continues to decline. The indicators for 7 months of the current 2022 are almost 10% lower than for the same period last year.

The US Geological Survey (USGS) has published new data on gold production in the country. Like last time, there is a strong time lag in the publication, as now only July data has been published. But again, the continuation of the clearly declining gold production is clear.

According to the USGS, in July, gold production amounted to 13.5 tons. This means that the production of the precious metal decreased by 2% compared to the previous month (June). Compared to July 2021, almost 12% less gold was produced. Meanwhile, the figures for 7 months of this year in the amount of 94.6 tons are 9.5% lower than the previous year.

As in other mining regions of the world, most of the gold initially available has already been mined. The US gold mining industry is suffering from declining gold grades. Companies are no longer discovering new promising fields. In addition, gold mining and exploration costs have continued to rise in recent years.

Even the rise in gold prices in recent years has not helped mining companies increase production. Although higher incomes from the sale of gold, in principle, allow gold to be mined in more remote regions.