President Trump’s decorators are not the only ones to bring gold in fashion.
Investors, fund managers and central banks around the world have accumulated in gold this year, pushing its price at around 50% higher and establishing a series of files in the process. Gold approaches $ 4,000 per ounce for the first time.
Gold, often considered a paradise during turmoil, has been over the best year for its best year since 1979, when prices have jumped more than 100% for a period of high inflation, a deprecating dollar and a geopolitical crisis in the Middle East.
There are uncomfortable echoes of this strong increase today, said analysts, who have awarded the recent increase in gold prices at the demand of investors who seek to move away from American assets at a time of political upheavals and uncertainty, underlined by the closure of the government. The Golden Rally also reflects a strong discomfort among investors, even if the actions have repeatedly established records, giving Wall Street a bullish air.
Gold also attracted buyers because other traditional paradise, such as the dollar and the US government’s obligations, have lost part of their pace. The federal reserve should continue to reduce interest rates, measures that could continue to weaken the dollar, which has already dropped around 10% this year. The concerns about debts and hot air balloon deficits have threw a cloud on American solvency, which no longer obtains a credit note at one of the main agencies after the degraded of Moody’s this year.
Another popular paradise, the Japanese yen, took a blow on Monday after the surprise election of a Liberal Democratic party leader who favored spending, tax reductions and lower interest rates. Later Monday, the abrupt resignation of the French Prime Minister, less than 24 hours after training his cabinet, still destabilized the geopolitical prospects and trained in the euro, sending investors to perceived security of gold.
The gold rally has been largely motivated by uncertainty, said Ryan McIntyre, Partner Senior Director at SPROTT, an investment management company specializing in precious metals. “Whether geopolitical, economical or now there is the cycle of interest rates entering people’s minds,” he said.
According to Goldman Sachs. Bank analysts increased their price forecasts on Monday, believing that gold would reach $ 4,900 per ounce at the end of next year.
According to Barclays analysts, the amount that money takes place in the largest golden back fund in the past two weeks has only been exceeded once in the past 20 years.
The rise in gold prices has also helped stimulate business stocks that exploit metal. An index according to gold extraction companies on the New York Stock Exchange has more than doubled this year.
Some central banks have moved assets denominated in dollars and gold in recent years, but the decision of private investors is what has added a momentum, notes analysts. Gold has increased sharply in the main currencies such as yen, euro and British pound.
“It really becomes more and more a strategic reserve asset, both for sovereign nations than for institutions,” said McIntyre. “People use it as a diversifier.”
Government closed is the last factor that led investors to gold. Market observers must make crucial economic data published by government agencies, increasing consternation and confusion regarding the health of the economy, in particular after recent signs of weakness in the labor market.
“The persistent weakness of the labor market increases the risk of recession or stagflation, supporting gold allowances,” noted analysts at State Street Investment Management.
