GOLD STARTS THE YEAR OFF STRONG—AND SOME SAY IT’S ABOUT TO GET EVEN BETTER FOR BULLION – CNBC
This Monday (27th Feb) saw gold rise to a three-month high of $1264.90 an ounce. This moderate increase has some economic strategists claiming we will see this particular precious metal increase in value even further in the not too distant future as investors move to this investment as a result of uncertainty within the political spectrum worldwide.
With 2016 seeing Britain leave the EU, referred to as ‘Brexit,’ there is now fear with the upcoming French elections in April that we will see a ‘Frexit.
Erin Gibbs, the equity chief investment office at S&P Global stated in a recent CNBC interview:
“We (referring to the French elections) really see this as heightened geopolitical risk” She went on to say “…the potential of a French “exit” from the European Union — and the German election in the fall. The U.S. dollar weakening slightly last week also helped push gold higher,”
“Bank of America Merrill Lynch forecasts gold rising to $1,400 by the fourth quarter of 2017 according to a report published Monday by foreign exchange strategist David Woo. Negatively yielding bonds have made gold appear more attractive in a sort of portfolio rotation, Woo wrote. As interest rates and the price of gold tend to move inversely, more flows into negatively yielding government bonds would cause gold to rise.
From a technical perspective, Miller Tabak equity strategist Matt Maley observed in a recent note that gold breaking above a key technical level of $1,250 was a positive signal and could lead to a “relatively quick” move to the $1,300 mark, though he added that gold may have a “breather” in the near future “to digest its strong recent gains.”
Historically gold rises when we see stocks take a downturn, but what is interesting right now is that both are rising simultaneously with gold up 10% YTD and the S&P500 up 6% at the same time. So from the rumbles that are coming out of Wall Street, it certainly seems like we need to keep an eye on gold over the coming weeks.