Market Commentary

Gold

shopper

Gold is one of the assets that does not move in conjunction with the stock market but rather tends to go its own way.  For instance, gold started to move up in October after a year of sideways action and while stock prices plunged in December, the worst December in history for stocks, gold kept marching up. In January stock prices recovered all month, and gold kept going up after a strong December.

Gold takes its own path. What drives gold is inflation, a weak dollar and fear. So what has been driving gold in recent months? It is not inflation, we have very little. The dollar dropped in mid-December so some of the recent move could be ascribed to the dollar but I think it all started with fear. The world economy was downgraded by the IMF at the end of last year; economies in the EU and China were showing and are still showing weakness. The Brexit vote in Britain failed. The trade issues with China deteriorated last year. These fears drove gold prices higher. Today those fears still exist and until they go away or at least sharply diminish they should still support the price of gold.

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