Make Kitco Your Homepage

Gold Hits 10-Mth High; These Are 3 Key Drivers - Analysts

Kitco News

Editor's Note: Kitco readers, have your say! Check out our newest feature - KITCO CHAT! - where you can share your comments and ask questions directly to us.

(Kitco News) - Gold continued its rally Monday, breaching above the key $1,300 level and hitting a 10-month high.

And one analyst says three factors are underpinning the gold market right now.

"I would say it's the low-yield environment, the trend of the dollar and strong growth in emerging markets [driving gold]," Jens Nordvid, founder of New York-based Exante Data, told CNBC last week.

"Those three things together are some of the things that have underpinned the gold rally, and they're still here."

And indeed, the weaker U.S. dollar was “still here” Monday.

The greenback kicked off the trading week on a weaker tone, which often trades inversely to the yellow metal. While gold pushed through $1,300 an ounce Monday, the U.S. dollar index moved to multi-month lows, last at 92.19. December Comex gold last traded at $1,315.80, up 1.38% on the day.

As Kitco’s senior market analyst Jim pointed out, it was really the U.S. dollar’s weakness that drove gold’s move higher Monday.

“A slumping U.S. dollar index that hit a 15-month low today worked in favor of the precious metals market bulls,” he said.

But, the other two factors Nordvid highlighted are also currently working in gold’s favor. Low yields lowers the opportunity cost of holding gold, while growth in emerging markets helps drive demand for the metal.

So, the metal seems to have a solid backdrop right now. But there’s more, Nordvid added.

Uncertainty in Washington is driving safe-haven gold as well.

"There's the government shutdown risk and then there's the debt ceiling risk," he said.

"That's definitely something that's holding the market back, and it's something that could potentially give a boost to gold while dragging the dollar down."

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.

Precious Metal Charts

Follow Kitco News