Has This Gold Market Run Out of Steam?
Has this Gold Market Run Out of Steam For Now?
Are investors worried that this gold market has run out of steam? With gold and silver kicking off the week continuing the pull back from last week, some investors are. What are the reasons for the pull back, and what does it mean going forward?
The most significant reason is that these past couple of weeks investors have been come less risk adverse. This is a fairly major reversal from the start of the year. Some of the reasons traders started flocking to safe havens were events in Syria, North Korean missile tests, tension between the U.S. and its trade partners, and interest rate hikes. Furthermore, there was considerable hype around European elections – notably France’s – that increased uncertainty levels. With Emmanuel Macron’s clinching of the French presidency, risk in the markets fell.
What this means for investors: There haven’t been as many majorly impactful events the past couple weeks as in the beginning of the year, so it’s not unexpected that the markets are entering a risk-on mode. Do you wait to buy or take advantage of low prices? For those looking for the ultimate security, buy now while prices are “on sale” and wider demand is in the equity market. Gold is always going to have value regardless of what unexpected events rock the markets.
Gold Made Back Some Gains Thursday, Friday
Metals initially continued last week’s pull back, but by Thursday, however, gold started to make back some gains as risk entered the markets again. The upwards climb continued through Friday. The dollar pulled back some as the euro rallied against it. Some risk and fear entered the markets again as well over rhetoric China, North Korea, and the South China Sea. Demand in Asia overall was up, which could be another reason for gold’s end of the week boost. Stocks also retreated some at the end of the week.
What this means for investors: The technicals in the market are still giving some support to gold and silver. Buying gold is long-term security. It very likely won’t make you money overnight, so look at long-term trends when deciding on a gold investment. It brings tangible security that other investments can’t ensure long-term.
Figures about the Economy that Tell a Different Story
There is some troubling data that underlies the rosy picture that the stock market’s Trump rally is telling. There are positive economic indicators such as unemployment numbers and GDP growth, but the numbers that pundits aren’t talking about are also telling.
- U.S. reaches $500 billion interest payments on debt for one year. Last week, the U.S. hit a new milestone. For last year, interest payments alone on U.S. debt hit $500 billion. This does not include the principal. It is a staggering number for an economy already in debt $14.3 trillion.
- Inverted Chinese yield curve. The Chinese yield curve went inverted this week. This means that 5 year bonds are yielding higher than 10 year. Economically, this makes no sense and indicates a move towards recession.
- The average American’s bank savings. 34% of Americans have 0 savings. 35% have less than $1,000.
- Labor participation rate. interested in participatingThe labor force participation rate measures how many Americans over the age of 16 who are in the labor force have a job. It’s currently sitting around 60%. That means that nearly 40% of Americans who want a job do not have one, despite the dropping unemployment rate.
What this means for investors: There are shaky fundamentals in the system that could undermine the recent upswings we have been seeing. Mainstream pundits are skirting some of these warning signs, but with such a gnawing away at the system, it’s only a matter of time before the structural pillars collapse. Gold will certainly be the most attractive option for investors when this happens.
Things To Look at Going Forward
There are events and trends to watch in addition to those above. Some of these are:
President Trump’s upcoming tax plan. Analysts are divided so far on whether it will grow the middle class or simply help the top percent.
Interest rates. The Federal Reserve has promised a few more for the year.
Geopolitical developments. Volatility will always send safe haven demand up, and there is significant tension around the world between major powers.
What this means for investors: Now is more important than ever to stay attuned to the markets. And don’t forget that gold always has value more than spot.
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Here are some articles from the web discussing the topics in this week’s post:
Has this Gold Market Run Out of Steam For Now?
Gold Made Back Small Gains Thursday, Friday
Figures about the Economy that Tell a Different Story
Things To Look at Going Forward
As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at 602-955-6500 or toll-free at 877-354-4040.
