By John McDonald
Halloween brought treats for gold investors this year as gold futures climbed above the $1,500 mark to post their highest settlement in five weeks. As investors become increasingly attracted to safe-haven investments toward the end of 2019, analysts believe the gold rally could continue into the New Year.
What is driving the current gold rally? A large part of the latest demand for gold lies with perceived weakness in the U.S. stock market and the U.S. dollar. Heading into an election year, stock market volatility is not just like; it is nearly guaranteed. Investor uncertainty about Wall Street will likely bolster gold prices for the next 12 months and longer.
Adding to investor concerns about the economy and Wall Street are rumors said to stem from Chinese officials about their doubts for a long-term trade deal with the United States.
“China basically said what everyone was already thinking, that this trade war will likely drag beyond the 2020 U.S. presidential election,” said Oanda senior market analyst Edward Moya. Chinese factories recently published their sixth straight negative factory activity report, which is adding to global economic uncertainty.
Finally, with German retail sales falling and Japanese construction orders softening, the global economy appears ready for a downturn. Even investors who do not usually place large portions of their capital into safe-haven investments like gold are adjusting their investment strategies to allow for focus on gold and other precious metals.
The result of this shift in investor sentiment has been that silver has also experienced a rally as well. In fact, silver futures ended above $18 for the first time since late September at the end of October.
Interestingly, Fed cuts to the interest rate have not firmed up investor confidence to the point where they are edging away from safe-haven assets. Because cutting interest rates usually signals that the central bank is actively pursuing a policy that will encourage and sustained economic growth, often this move by the Fed will reduce interest in precious metals.
However, investors are presently taking interest-rate cuts as a sign that the world economy and the U.S. economy are still at risk. The result has been very positive for holders of gold, silver, and other precious metals.
January platinum rose at the end of October to over $933 an ounce, and December gold was trading in excess of $1,514 an ounce. With silver rising to more than $18 an ounce, Halloween posted the highest and most-active contract finish since the end of September.Source: MarketWatch