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Mining chief: Fed hike shouldn’t shake faith in gold

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A Federal Reserve interest-rate increase this year shouldn’t shake investors’ faith in gold, according to Australia’s second-largest producer.

Bullion is trading near the lowest level in more than three months after slumping 3.3 percent on Tuesday, the biggest loss in over a year. Prices have tumbled on worries that central banks are poised to curb stimulus and that the Fed may be set to raise interest rates in December for the first time in 12 months as the economy improves.

The probability of a Fed hike in December has risen to 62 percent, from 54 percent a week ago, futures data compiled by Bloomberg show. Still, any increase in U.S. borrowing costs needs to take into account that central banks have cut rates about 600 times since 2008, Evolution Mining Ltd.’s Executive Chairman Jake Klein said Thursday in an interview with Bloomberg Television’s “Daybreak Asia”.

Klein said, “In context, conditions are still favourable for gold”.

“I’m optimistic on the gold price, because we are in an environment where we have unprecedented low interest rates. It’s difficult to see rates rising a lot”, continued Klein.

Paul

The author Paul