Gold prices have been moving higher in recent weeks, and showing some signs of underlying strength. As can be expected, the market has seen some buying interest come in as geopolitical tensions escalate. Last weekend’s chemical weapons attack in Syria had investors seeking out the perceived safety of gold and caused some selling in equities.
A recent comment from President Trump, however, has stocks rallying today as risk appetite has returned. As stocks move higher today, gold is moving lower. Although such a move should not come as much of a surprise, it does beg the question of whether any upside in the gold market depends on geopolitical factors.
The answer is no.
The current price action in gold may be a lot more about the dollar than the current geopolitical climate. Although the greenback is moving higher today in early action, the dollar index has been oscillating between the 88 and 90 levels. The currency has thus far not been able to sustain trade above the 90 level. Given the exploding deficit and other issues, this could potentially be indicative of more downside to come for the currency-and investors are paying attention.
In other words, the current trade being seen in the gold market is not a “fear” trade but likely rather a “dollar” trade. The potential for an increasing trade war, higher interest rates and other global dynamics may be the primary catalyst for price action in the market. Many of the current issues being seen, such as trade and the upcoming mid-term elections may keep the dollar index at bay, while also potentially fueling market volatility.
Although the dollar may be the biggest driver of price action in the gold market currently, that is not to say that the geopolitical landscape is not also a factor. A military response to the recent atrocity on Syria would likely boost prices in perceived safety assets like gold, and could also have a very negative effect on risk assets. Increasing tensions with Russia, or any further escalation in the conflict with North Korea could also fuel significant risk aversion.
The point is, there are numerous reasons for which to acquire and maintain a significant allocation in gold, and it is never too late to get started. Gold can potentially provide not only significant upside, but may also provide a meaningful hedge against several economic issues such as inflation, deflation, a weaker currency and lower stocks.
Speak with an Advantage Gold account executive today about the potential benefits of gold ownership. Our associates are here to answer any questions you may have, and can even show you how to build an allocation in this key asset class using your IRA account.
Don’t wait for a weaker dollar to erode your purchasing power further, or for the next major stock market crash to wipe out billions in accumulated wealth. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, dollar index, geopolitical tension, gold, president trump, syria