Gold is climbing sharply higher today as an improving technical posture, weaker dollar and disappointing data fuel buying interest.
In what seems to be a recent trend, the latest reading on ISM manufacturing came in below expectations. Although the reading was still solid, the slightly lower gauge could potentially point to weakening economic growth. Other key data points in recent weeks have also shown a tendency to come in slightly below consensus estimates, and if the recent trend does continue it could start to raise some serious questions about the strength of the economy and how the Fed and other issues may be slowing things down.
The dollar index is seeing some sharp selling today after reaching another multi-month high around the 97 area. Although it is not yet clear if a top has been reached in the dollar, today’s sell-off could potentially point to more weakness ahead for the greenback. The dollar has likely played a major role in the yellow metal’s lack of upside in recent months, and a major reversal in the currency could set the stage for a significant rally in gold and other dollar-denominated assets.
Recent weakness in both data and now the dollar could potentially be due to the fading effects of tax cuts and government spending. This also comes at a time when bond yields are rising and the U.S. is still engaged in a trade war with China. A combination of these factors could lead to another round of selling in stocks and risk assets or even the next recession.
Stocks are busy today attempting to put together a three-day win streak-which would be the first for some time now. The month of October was brutal for equities, and it is unclear if stocks will be able to challenge previous highs. Of note, however, is the fact that gold is sharply higher today despite stocks also being sharply higher. This type of price action is unusual and could be indicative of significant underlying strength in the gold market.
Financial assets could be at a major crossroads currently, and a great asset reallocation could be seen in the weeks and months ahead. Therefore, now may be the ideal time to start building a significant allocation in alternative assets, and what better asset class to diversify with than physical gold?
Given the current economic and geopolitical backdrop, stocks are likely to see further declines and rising market volatility. The decade-long rally may be at an end, while a new, protracted bull market in gold gets underway.
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Don’t wait for the next major stock market collapse or for the next recession to take hold before acting. Explore your options for gold ownership today. Call Advantage Gold at 1-800-341-8584 to get started now.Tags: advantage gold, dollar, economic growth, gold, ISM manufacturing, stock market collapse