Gold’s Safe-Haven Allure Has Metal Soaring

Numerous factors converged towards the end of 2018 and sent gold soaring towards a six-month high.

gold barrels in 2019

Despite ups and downs in the second and third quarters, Newsmax reports that gold rebounded to end 2018 on a stronger note than most other assets. Numerous factors converged towards the end of the year to send the metal soaring towards a six-month high.

According to the Newsmax article, a key among these has been the escalating trade war between the U.S. and China. Although gold didn’t immediately react to tensions between Trump’s and Xi’s cabinets, the ramifications of the back-and-forth tariff battle came into prominence as the year drew to a close. With concerns that Xi could maintain his hardline stance for the duration of President Trump’s current term, the conflict is likely to keep sending shock waves across the market throughout 2019.

The threat of a government shutdown in the U.S. materialized on December 22 as Congress members found themselves unable to reach a budget consensus. While it’s unclear how long the shutdown may last and how hard its effects will be felt on the economy, President Trump recently warned that the shutdown could last for months or even years in the absence of a sound agreement.

The article states that the uncertainty surrounding the situation and the negative implications for both citizens and state were another contributor to gold’s price jump.

In the weeks leading up to the shutdown, the U.S. economy faced other hurdles as analysts pointed to signs of stagnant growth in the near future. For most, the biggest talking points have been the equity market’s plunges after years of record-setting performances. According to the article, many found it particularly concerning that previously robust tech stocks, such as Amazon and Apple, experienced some of their worst losses ever during this stretch.

Government officials have by and large dismissed these red flags as mere flash crashes, but worries persist that the stock drops could be a harbinger of another recession.

Moving into 2019, Newsmax reports that gold faces a favorable landscape free of several headwinds that kept the metal down the previous year. Jingyi Pan, market strategist at IG Asia, pointed to the expected easing of the Fed’s hiking policy as perhaps the metal’s most bullish driver this year.

Having hit $1,280 an ounce in December to post its best monthly gain in almost two years, the metal looks to make the most of reignited safe-haven demand as it heads towards the next resistance level. Benjamin Lu, an analyst at Phillip Futures, lists $1,309 as the next breakout point for gold, adding that strong haven demand is sure to persist for the remainder of the quarter.

According to Newsmax, other precious metals have come out with strong performances of their own. Silver jumped by more than 9% over the past 30 days amid calls that the metal is severely undervalued and slated for an upwards correction. Palladium likewise rounded up its third consecutive year of gains amid a notable spike in demand.

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Portfolio Theory Makes Case for Gold Hard to Ignore

The case for investing in gold today is as strong as it was during any tumultuous period in history.

portfolio theory case for gold

As Seeking Alpha’s Logan Kane notes, gold boasts perhaps the most diverse palette of investors out of any asset. Although some traders swear by other, riskier assets, Kane says it’s hard to ignore the case for gold as an ultra-reliable choice.

Since 1968, the metal has returned an average of 7.1% each year. It has also handily beaten the dollar since President Nixon abolished the gold standard, with the greenback losing 98% of its value against gold. On first glance, the global geopolitical landscape of today seems to be far removed from the strife-ridden 1930s, 1940s and 1970s, when gold was also a prominent investment.

Yet Kane points out that appearances can be deceiving. He writes that, while the most advanced countries of the world have, for the most part, managed to hold onto peace and prosperity, emerging markets are a constant powder keg which threatens to spill over to the rest of the world.

In calmer times, some investors insist on moving into riskier assets like stocks or even bonds in pursuit of profit. But as Kane points out, investing in such assets subjects one to currency devaluation regardless of the landscape. Moreover, data shows that gold has beaten stocks on a price-appreciation basis since 2004, putting into question the idea that equities are a more lucrative bet.

Investors such as Ray Dalio have demonstrated that investing in gold during periods of higher interest rates can provide incredible returns. Further analysis shows that gold’s returns are much more reliable compared to stocks, appreciating in a methodical upwards fashion as opposed to downside crashes found in equities.

According to the article, the case for investing in the metal today is as strong as it was during any tumultuous period in history. The metal’s purpose is to protect investors from the ever-present volatility, offer unparalleled diversification to any type of portfolio and shield them from inflation.

Contrary to the 5% allocation to gold that some money managers preach, an analysis of portfolios over the past decade showed that gold enjoys far more favor among investors, with some allocating up to 14% to it. In times of peace, the metal provides a very reliable 5% annual return with massive potential for gains should the world stage turn sour.

Kane is also critical of the view that gold is a niche investment appealing to a narrow range of investors. Extremely wealthy individuals and central banks swear by gold to hedge their bets, and the latter remain the strongest buyers of gold with hundreds of tons of bullion acquired every year.

Those who ignore gold’s role in a portfolio and instead focus fully on stocks and bonds have been known to suffer severe losses when these assets take a dive, reports the article. Conversely, investors like Dalio show that faith to the metal and an understanding of commodity dynamics can return more profit than any risk-oriented investment strategy, all the while giving peace of mind to investors should another recession or conflict take center stage.

Reliable Chart Sends Bullish Message to Gold Bugs

Analyst states U.S. Dollar/Gold ratio stands as accurate gauge of where the metal’s price is headed.

gold bugs hopeful from dollar/gold chart

As Shawn Langlois points out in a MarketWatch article, there is plenty of geopolitical and economic strife gripping the world right now. The recent flash crashes of the U.S. and Asian stock markets are but one example of why demand for safe assets could be skyrocketing.

Besides trouble in stocks, the article writes domestic investors have felt the burden of an ongoing trade conflict between the U.S. and China with severe implications for the global economy. The Federal Reserve’s policy has likewise caused its share of worry, with some accusing the central bank of leading the country towards a recession through excessive tightening.

On the global stage, the article reports emerging markets have looked particularly wobbly as Turkey and Venezuela each slipped into a full-blown currency crisis. Growth and budget concerns that the European Union faces have also raised red flags from the eurozone.

But despite all this, gold investors remain conspicuously absent from the market. According to the article, while the metal notched some impressive wins over the past weeks, gold bugs still haven’t seen a flight to safety in proportion with the risks on the horizon.

However, the article states one technical chart suggests that the waiting might be over. In his examination of the U.S. Dollar/Gold ratio, analyst Chris Kimble noticed that the chart is sending a bullish message and is potentially signaling a reversal in the dollar.

According to Kimble, the U.S. Dollar/Gold ratio stands as one of the most accurate gauges of where the metal’s price is headed. The ratio’s climb from 2011 to 2016 corresponds with gold’s pullback from its 2011 highs. Kimble blames this year’s strengthening of the ratio for a lack of real upswings in the gold market.

The analyst believes that U.S. Dollar/Gold ratio chart is forming a double top below the falling channel resistance. In trading terms, double tops are two peaks in a row that can signal the bearish reversal of an asset.

While the dollar has looked strong this year, Kimble notes that the U.S. Dollar/Gold ratio has been on a decline since its 2016 peak. The dollar’s momentum since the start of the year may have kept gold prices in check, but Kimble thinks that the streak is finally ready to spill over and reverse.

If true, this could be a herald of what many believe is an overdue correction in the dollar index. Should this be the turning point for the greenback after a nearly 12-month long rally, the article writes gold investors will indeed have something to look forward to as the metal quickly responds to any sign of weakness in the dollar.

Senior Analyst Sees Rise in Gold and Silver Prices in 2019

French bank Natixis shares what could push the metals significantly higher.

strong gold 11-5-18-2

According to the latest commodities report by French bank Natixis, the era of a strong dollar pushing down on gold prices is coming to a close. A recent article on Kitco reports that the bank’s Commodities Price Outlook for 2018-2019 has gold and silver ending the next two years on a significantly higher note.

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Gold Expected to Rally By End of Year Despite Unjustified Performance

Director of WisdomTree Investments says gold is in the perfect spot for a rebound.

gold ripe for rally

Some would call gold’s measured performance this year understandable due to the different headwinds the metal has faced. Since the turn of the year, gold has had to contend with a stronger dollar, rising bond yields and a hawkish Fed rhetoric that promises multiple rate hikes by the end of 2019.

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Why Gold Market Will Act Differently During Next Financial Crisis

Some analysts think the next crisis will be the same as 2008, but others disagree, specifically when it comes to gold.

market crash won't take down gold

Despite the perceived strength of the U.S. economy and votes of confidence from global central bankers, one doesn’t need to look far to find warnings that another financial crisis is approaching. These doomsday scenarios usually involve the U.S. slipping into a recession, with the accompanying erosion of the dollar and soaring inflation. A recent article on Streetwise Reports focused on the current economic landscape to see how a new financial crisis would differ from that of 2008, and what it would mean for gold prices.

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Gold To See Safe-Haven Demand from Trade Tensions

A storm is brewing as the U.S. continues to increase tension with Canada and China.

trade tensions to help gold

According to an article on Kitco, gold is gearing up to gain an additional $15 an ounce in order to overcome the next resistance level. Helping it along the way could be a renewal of trade tensions and a questionable secondary-currency market picture.

After a prolonged period of calm, a storm appears to be brewing as the U.S. and Canada passed their 90-day deadline to form a new draft for the NAFTA agreement. While the White House agreed to extend the talks by an additional 90 days, the situation reminded onlookers of the tense relations between President Trump and Canadian Prime Minister Justin Trudeau.

According to the article, both parties have made it clear that they will not budge on their terms, with Trump going a step further by hinting towards a possible exclusion of Canada from the trilateral agreement should no common ground be found. During his campaign, Trump criticized the NAFTA agreement, calling it one of the worst deals in history. More recently, the President minced no words in saying that Canada was taking advantage of the U.S. and threatening new tariffs in the absence of a mutual agreement.

Trump spoke similarly about the European Union, referring to it as exploitative and hinting towards heavier levies on car and vehicle parts, although no action has yet been made. China, on the other hand, will soon feel the brunt of their trade issues with the U.S. says the article, as the White House prepares to usher in a third round of tariffs on $200 billion of Chinese goods.

Besides trade flare-ups, the article states that gold was also boosted by the murky prospects of secondary currencies, against whom the dollar has weighed on heavily in recent times. The start of September signals an end to summer holidays for many traders and a somber return to their platform after several easygoing months. Hence, September and October are generally seen as months of worry, during which market participants become increasingly cognizant of risks in the global economy.

According to the article, this could lead to traders re-examining their position on secondary currencies and making other risk-off decisions. Some of this seemed to already show on Friday, when the soaring stock market finally gave way to mild profit taking.

The technical chart backs gold’s case, as the negation of the daily price downtrend suggests that the market has bottomed out. In the coming months, traders and gold bulls will keep a close eye to see if the metal can breach the next solid resistance.