Will Gold offer stability to the investors while the stock market volatility continues?
Team Veye | 17-Dec-2018
With stock indexes being volatile and witnessing a major price correction, the precious metal should have made a strong comeback. And, the same is historically proven that every time there is a market crash, Gold prices soar but there seems to be more to the story this time around with contribution from other factors. The China's economy is slowing down, along with Germany and parts of the European Union majorly because of the Brexit impact. Crude oil has not picked up despite an agreed production cut by OPEC members, one would expect interest of the investors in the gold market and that certainly is the case too but with the dollar being so strong, all the prospects of a hike in Gold have been dampened. And, it's going to take a major news story to bring the price of gold back in favour with investors.
Gold is often sensitive to movements in the dollar. The dollar rose to a 19-month high after data showed U.S. consumer spending appeared to gather pace while industrial production rebounded in November. Gold fell to its lowest level in almost two weeks on Friday as robust U.S. economic data boosted the U.S. currency. Gold futures settled down 0.41% at $1,242.30 on the New York Mercantile Exchange late Friday, after falling as low as $1,236.50 earlier. For the week, gold was down 0.89%. The gold prices rose to a five-month peak of $1,250.55 an ounce on Monday last week, but has given up all the gains as the dollar strengthened against a basket of major currencies.
So, what’s going to happen next?
Well, in a major development scheduled to take place this week, the precious metals traders will be focusing on the Federal Reserve monetary policy meeting for its impact on the U.S. dollar on Wednesday, which heavily influences gold’s performance. The Fed is widely expected to deliver a quarter point interest rate hike at its meeting and will also update its economic projections and the dot plot of interest rate projections. Concerns about the outlook for global growth along with trade tensions and market volatility have prompted traders to push back expectations on the expected pace of Fed rate hikes in 2019. And with the Fed rate hike next week, any gold price rise will be hampered by expected dollar strength as per some precious metal experts.
During the last few days, the Gold prices have remained steady on uncertainty over Fed policy outlook and as a word of caution, our analysts advise that it would be wise to hold on to your urge of investing in Gold until the position gets more clear in the Federal Reserve monetary policy meeting this Wednesday.
But as investors you need to keep in mind that everything that glitters is not gold. Here's a performance summary of some major gold stocks listed on ASX during Oct'18 month till date:
Veye Pty Ltd(ABN 58 623 120 865), holds (AFSL No. 523157 ). All information provided by Veye Pty Ltd through its website, reports, and newsletters is general financial product advice only and should not be considered a personal recommendation to buy or sell any asset or security. Before acting on the advice, you should consider whether it’s appropriate to you, in light of your objectives, financial situation, or needs. You should look at the Product Disclosure Statement or other offer document associated with the security or product before making a decision on acquiring the security or product. You can refer to our Terms & Conditions and Financial Services Guide for more information. Any recommendation contained herein may not be suitable for all investors as it does not take into account your personal financial needs or investment objectives. Although Veye takes the utmost care to ensure accuracy of the content and that the information is gathered and processed from reliable resources, we strongly recommend that you seek professional advice from your financial advisor or stockbroker before making any investment decision based on any of our recommendations. All the information we share represents our views on the date of publishing as stocks are subject to real time changes and therefore may change without notice. Please remember that investments can go up and down and past performance is not necessarily indicative of future returns. We request our readers not to interpret our reports as direct recommendations. To the extent permitted by law, Veye Pty Ltd excludes all liability for any loss or damage arising from the use of this website and any information published (including any indirect or consequential loss, any data loss, or data corruption) (as mentioned on the website www.veye.com.au), and confirms that the employees and/or associates of Veye Pty Ltd do not hold positions in any of the financial products covered on the website on the date of publishing this report. Veye Pty Ltd hereby limits its liability, to the extent permitted by law to the resupply of services.