By John McDonald
With global economic tensions remaining high, gold’s price gains showed little sign of slowing. With the Federal Reserve signaling it could cut interest rates by the end of 2019, central banks buying up bullion and hinting around stimulus, and the U.S.- China tariff conflict apparently here for the duration, investors need little motivation to look for and invest in safe-haven asset classes. Gold, of course, tops the list.
“Gold bulls are back in control,” said senior market analyst at Oanda Corp. Edward Moya. He added confidently, “The question is no longer will the Fed ease, but by how much?” Moya went on to predict an easing cycled “kicked on” by a 50 basis point cut, which Minneapolis Fed president Neel Kashkari has already said he believes is in order.
In response to this news, spot gold climbed to more than $1,400 an ounce while hedge funds boosted net long positions on U.S. gold futures and options. Silver, platinum, and palladium all gained as well. Martin Lakos, division director at Macquarie Wealth Management, recently predicted on Bloomberg TV that gold would hit $1,450 by the second quarter of 2020.
Seeking Alpha analyst Adam Hamilton wrote in late June 2019 that he expects the demand for gold to feed upon itself for quite some time, thereby creating a long-term gold “upleg.” He wrote, “The higher gold climbs, the more investors want to own it. The more they buy, the higher gold rallies. As investors love chasing winners, nothing drives buying like new highs.” Hamilton even gave this pattern a name, new-high psychology, and called it “the most powerful motivator fueling big investment buying.”
Of course, all this talk of a gold bull market falls a little flat when the market closes lower, even if the “snap” is relatively minor. When gold futures finished lower on the last Monday of the month in June, investors only looking at surface-level issues might have been tempted to sell off instead of buy more gold. However, global events are coming together to limit losses for precious metals investors, mainly by creating an ongoing demand for safe-haven asset classes thanks to concerns over a weakening global economy and a stock market that might be flying just a little too close to the sun. The worsening relations between the United States and Iran further solidifies the bullish gold trend.
“With the worsening of US-Iran relations…it is becoming quite clear the yellow metal [gold] is becoming a hot favorite” last week, wrote Hans News Service report Dr. H. C. Upadhyay. He described investor activity at present as “making hay while the gold is shining,” an apt description for any savvy gold investor.