Gold is considered to be a “safe heaven”
asset and as such should theoretically move in the opposite direction with such
risky assets as stocks. So far this year, US stocks (as represented by Dow
Jones Industrial Index) and gold have both brought rather strong returns, above
10% each.
Lately, the tensions around North Korea
have kept stocks under pressure while causing a small rally in the price of
gold. Monday, September 11, was quite characteristic for these assets’
movements: in the absence of bad news from North Korea, gold dropped while
stocks soared, also supported by the fact that Hurricane Irma did not hit
Florida as strongly as had been expected.
Gold Dec 17 (red line) vs. Dow Jones Industrial Average in 2017, YTD
Current forecasts for gold differ: Carsten
Menke, commodities research analyst at private bank Julius Baer (via cnbc.com), downplays the global security
concerns and thinks that given the solid expectations of economic growth in the
United States and the outlook for higher interest rates, the U.S. dollar is
likely to rise higher which would drive the price of gold lower.
On the contrary, markets expert Jim
Rickards (via thestreet.com) expects that gold will continue going higher and
could eventually could go much higher from the current price of about $1,340 an ounce. “I'm
just looking down the road and you can see that war is coming," he told
Kitco News.
Quite likely, the immediate future will
tell who of these two experts is right.
Ukrainian Credit Union Limited
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