Cen­tral banks fac­ing loss of faith: Gold vet­eran

The Pak Banker - - COMPANIES/BOSS -

Gold's rally is be­ing driven as in­vestors start to lose faith in cen­tral bankers' abil­ity to deal with eco­nomic chal­lenges, ac­cord­ing to Evo­lu­tion Min­ing Ltd.'s Jake Klein, who said the metal's ad­vance has been strong enough to draw at­ten­tion from long-time bears.

"The safe-haven de­mand ap­pears to be where peo­ple are fo­cused on, and that is on a loss of faith in cen­tral banks be­ing able to man­age through this pe­riod," said Klein, ex­ec­u­tive chair­man of Aus­tralia's se­cond-big­gest pro­ducer. Bul­lion is "cer­tainly get­ting more at­ten­tion from peo­ple who have gen­er­ally been bears over the past few years," Klein said in a phone in­ter­view.

Gold has soared 14 per­cent this year to be­come the best per­former on the Bloomberg Com­mod­ity In­dex as fi­nan­cial-mar­ket tur­moil and con­cerns over slow­ing growth have fired up de­mand. Cen­tral banks in Europe and Ja­pan have pressed on with neg­a­tive in­ter­est rates to try to add stim­u­lus and even Fed­eral Re­serve Chair Janet Yellen said the U.S. cen­tral bank is tak­ing an­other look at the tool, if the econ­omy fal­ters. Prices have gained as in­vestors scaled back ex­pec­ta­tions for tighter pol­icy from the Fed.

"There seems to be gen­eral skep­ti­cism now, both from the Fed's lan­guage and from mar­ket par­tic­i­pants, as to whether that's go­ing to be pos­si­ble," said Klein, who's been a gold-in­dus­try ex­ec­u­tive for about 20 years. "All the fi­nan­cial mar­kets, and all the as­set classes, seem to be highly sen­si­tive to cen­tral-bank pol­icy."

Gold, which traded at $1,205.43 an ounce in Lon­don on Thurs­day, has re­bounded from a fiveyear low set in De­cem­ber as a gauge of global stocks dropped 6.7 per­cent in 2016. Klein cau­tioned that the metal re­mains well below its 2011 peak of $1,921.17. "It's ral­lied off a sig­nif­i­cant low point," he said. The Fed's lan­guage this week has added to the case for rates stay­ing lower for longer. Fed Bank of St. Louis Pres­i­dent James Bullard said on Wed­nes­day that fi­nan­cial tur­moil and a fur­ther de­cline in in­vestors' ex­pec­ta­tions for in­fla­tion have given the bank scope to de­lay rate rises.

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