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Go For Gold: Why Bullion Prices Could Keep Exploding Next Week

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Those who had the forward thinking to hold gold at the start of the year are toasting a near-20% rise in the value of the metal right now.

Some light profit-taking has seen the yellow metal become a little more volatile in recent days, though it’d be a brave man to bet against some more significant gains in the days ahead. Indeed, spot gold is making a fresh charge as I speak and is up around 10 bucks on the day at $1,510 per ounce and just off recent six-year peaks.

With the critical $1,500 per ounce barrier left in tatters, well, the sky is the limit for the world’s premier safe-haven asset.

Watch Europe

So what could fuel bullion prices in the days ahead, then? Well economically there’s a number of key releases that’ll be closely watched by market makers for signs of fresh stress in the global economy.

More specifically, there are a slew of manufacturing and services PMI releases due from across the eurozone on Thursday, and latest numbers from Germany in particular could have an explosive impact on investor confidence. The manufacturing PMI gauge for the Central European economic powerhouse remains deep in contraction below 50 and fell to its lowest since the depths of 2008/2009 financial crisis at 43.1 in July.

Services have held up better and remained in expansionary territory at 54.5 last month. However, with the broader economy hitting the skids it’s critical to be aware of a plunge here in the weeks ahead, too.

Those releases will be of special interest in the wake of GDP numbers released midweek which showed the German economy contract 0.1% in the second quarter, fuelling talk of a potential recession later in the year.

Watch The Banks, Too

Elsewhere, latest minutes from the Federal Open Market Committee (set for Wednesday) could give gold prices a hefty kick as well. The Fed’s famously been becoming more and more doveish as 2019 has progressed amid rising signs of a US recession. And so clues in the coming days that suggest additional rate cuts in the near future could have the dual effect of raising inflationary expectations and weakening the US dollar, both of which play into the hands of greenback-denominated gold.

It’s also possible that notes from the Reserve Bank of Australia could give bullion a boot in the right direction. Lawmakers down under have been cutting rates like nobody’s business of late, culminating in the record lows of 1% plunged in July. And it’s quite possible that the bank will announce that it’s not done yet, a situation that could prompt more diversification from fiat money and into that classic hard currency gold.

Fragile China

Arguably, though, the biggest possible driver of precious metals in the days ahead could emerge in the form of military action in Hong Kong.

After two-and-a-half weeks of pitched battles between protestors and security forces the saga now seems to be coming to a head, with photographs just emerging which show Chinese troops massing on the border. With neither side still not backing down things could turn very ugly very soon.

Clearly any use of force by Beijing would could drive more fearful investors into gold, and not just because any government crackdown could ratchet up tension surrounding already-frosty US and Chinese trade talks, another source of anxiety threatening to keep driving gold prices in the near term and beyond.

It’s no wonder, then, that City analysts have been busy upgrading their estimates in recent sessions, with many like Goldman Sachs tipping a run towards $1,600 per ounce as early as February. Gold may have gone ballistic recently but there appears to be much more fuel left in the tank.