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Metals trader links interest rate reductions with increased gold investment

A metals trader based in Chicago has added his voice to claims that low interest rates could ultimately lead to increased gold investment and a higher gold price.

In an interview with Bloomberg, Matt Zeman said that interest rate cuts effectuated by the Bank of England, European Central Bank and Swiss National Bank - coupled with a base rate of just one per cent in the US - could lead to a devaluation of global currencies.

Low interest rates may also cause a build-up of inflationary pressures, and Mr Zeman believes that these two factors combined could lead to gold becoming an increasingly attractive investment option.

"Gold may eventually rebound as global interest-rate cuts devalue currencies and stoke inflation," he told the news provider.

"If everybody continues to drop rates and rates stay very low, inflation may come back with a vengeance. In that environment, gold would do very well."

This view has been echoed by Angus McPhail, a global oil and natural resources analyst at Alliance Trust, who told Professional Adviser: "Inflation, falling interest rates, and weakening currencies (notably the US dollar) are all positive for gold prices."

He has also predicted an increase in demand for gold in the light of lowered supply expectations in South Africa and the worsening macro-economic conditions.

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