Gold, temporary disaffection on the markets - EaglesInvestors

Despite the global commercial uncertainties, investors continue to shy away from safe havens such as the yellow metal commodity: Gold.

Gold Price

Trading Market and Gold

The investors seem confident in the outcome of the global commercial tendencies but in the classic commodities. Gold, a safe haven par excellence, is no longer popular with investors. Worse, the yellow metal continues to lose its value. The ounce of gold is currently trading at 1222.8 dollars this morning after falling to 1212 dollars in recent days. It’s an unknown floor for over a year. And, since the beginning of the year, ETFs (Exchange Traded Funds) linked to gold have lost more than half a billion dollars according to ETF Securities.

The price of gold is generally displayed in dollars. It’s mechanically weakened by the strength of the green bill. But, even in case of gold is displayed in euros, in yen or Swiss franc, the yellow metal is struggling. The same situation goes for the silver as well. Indeed, the sliver’s price is at its lowest point for two years. The escalation of global commercial uncertainties is a vector of fear on the markets usually. But nowadays, it seems to have no effect on the gold price, which no longer plays its traditional role as a safe haven.

“Surprising that gold prices are lower, given escalation in trade wars”: Societe Generale from CNBC.

How to explain the situation of Gold today?

The yellow metal doesn’t attract the usual interest of the investors. It is in bad shape in the face of equity markets where dividends are constantly appreciating. And the logic seems unstoppable. “why buy precious metals, which do not yield, when we can have shares much more profitable?”, wondered recently specialists the BNP Paribas group.

In fact, corporate profits and, in turn, dividends are sharply up. This year, analysts expect a jump of over 20% in earnings per Standard & Poor’s 500 companies share. They benefit from the strength of the global economy and the great tax cuts granted by Donald Trump. In Europe, where companies do not benefit from the same fiscal leverage, analysts expect an increase of about 10% of profits for the current year. What remains a very good performance.

Rising US rates

The rise in US rates also tends to distract investors from the yellow metal. The price of gold has bottomed out just as Jerome Powell, The Chairman of the Federal Reserve, confirmed the scheduled rise in US rates.


source: tradingeconomics.com

Precious metals recovered slightly last Friday as the dollar was cut in its tracks. Donald Trump worried about the strength of the US currency, which is crippling big companies outside the borders. “China, European Uni, n and others manipulate their currencies by lowering their interest rates, while the United States raises rates with a dollar becoming stronger every day, which degrades our competitiveness,” said the president of the United States in a raging tweet.

The World Gold Council estimates that demand for the precious metal is expected to rise in the coming months, in particular, due to a return of inflation, which is reducing the value of currencies and bonds.

A case to follow… Learn some basics to trade Gold and FX!

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