Gold Prices Climb as Argentina Crisis Worsen

Investing.com – Gold prices rose on Wednesday morning in Asia, driven by the ongoing currency crisis in Argentina, which economists expect could lead to a recession, a weaker peso and higher inflation.

for December delivery went up 0.06% to $1,199.7 at 10:47PM ET (02:47 GMT) on the Comex division of the New York Mercantile Exchange.

A monthly survey by Bloomberg on Tuesday showed that Argentina’s inflation is expected to hit 40.3% at the end of the year, higher than the 31.8% forecasted in July. The peso is expected to be trading at 41.9 against U.S. dollar by end of this year, much weaker than the expected rate of 30.5 anticipated during a July survey. The peso has plummeted 52% against the dollar this year.

With a number of emerging markets including Argentine, Turkey and Indonesia battling currency crises, the demand for gold, which is widely seen as a safe haven asset, is likely to rise.

Argentina’s central bank sold $3.5 billion of devalued peso on Tuesday. The bank has sold $6 billion since late June.

On the same day, Argentine Economy Minister Nicolas Dujovne met with the International Monetary Fund (IMF) looking to speed up the release of a $50 billion aid package. The IMF’s Managing Director Christine Lagarde released a statement that progress has been made in the talks while Dujovne told journalists that it “was a very good meeting.” No specific date has been set for the release of funds or how much will be released.

Also on Tuesday, Bloomberg Intelligence senior commodity strategist Mike McGlone predicted on Tuesday that a U.S. Federal Reserve meeting on Sept. 25-26 will have a positive impact on gold prices.

“The dip in the metals bull market appears near its nadir… Gold has declined 15% from its peak this year, yet remains in a rising trajectory in this rate-hike cycle despite the stronger trade-weighted broad dollar and record-setting stock market. A bit of sustained mean reversion in the stock or dollar should unlock the cage for the well-rested gold bull,” he said.

“Getting past the expected Federal Reserve rate hike in September should be positive for gold, in recovery mode from good support near $1,165 an ounce. Looking at what gold ETFs have done during this Federal Reserve tightening cycle, we believe prices are likely to rise soon.”

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