Gold is currently under the pressure of the dollar’s strength. Gold prices started to decline after the uncertainties regarding the stimulus package in the US and the dollar’s rise.
You know, gold is a protection against low interest rates, not market risk. In the last few months, the gold market has turned into a hedge against falling interest rates. According to the world’s largest wealth fund manager, it has become a safer harbor.
BlackRock Global Allocation Fund portfolio manager Russ Koesterich wrote in a report last week that gold is positively correlated with stock markets. He said gold currently has a beta of 0.3 against the stock markets:
“This change in correlations is not unusual for gold. In different economic environments, gold can behave very differently. One explanation for the latest change is that both gold and stocks are increasingly reacting to a common factor: Federal Reserve policy. To the extent that investors expect the Fed’s new policy framework to support easy money and negative real rates, both gold and stocks respond to the same fundamental dynamic. ”
As to what this means for the investment outlook for gold, Koesterich said he continues to see the potential for higher gold prices in a low-interest environment. The famous name said, “As I emphasized before, gold performs best when real rates are negative and opportunity cost in lost income is low. As the Fed has repeatedly emphasized, this will probably be the environment we have been in for a while ”.
Koesterich’s comments came along with the fluctuating course of the gold price due to changing expectations for fiscal stimulus measures. Last week, President Donald Trump frightened the markets when he stated that he had canceled all incentive negotiations until after the election. However, this decline stalled somewhat as he later mentioned a $ 1.8 trillion aid package.
Below Price Expectations
BlackRock Global Allocation Fund portfolio manager Russ Koesterich said he continues to see the potential for higher gold prices in a low-interest environment. This is a very important detail for investors.
However, another analyst, Margaret Yang of the DailyFX, also talked about the possibility of a fall. “The rising dollar is putting pressure on gold prices. Gold prices may encounter the first support at $ 1,910 ”.
Hopes that the incentive deal could precede the November 3 elections raised gold prices to over $ 1,900 per ounce. Gold futures traded at $ 1,929.40 an ounce, up 0.17% on the most recent day.
The gold market has attracted a record investment this year, whether it be a measure against unprecedented excessively loose monetary policy or a safe haven asset in an era of increased uncertainty and market turmoil. Last week, the World Gold Council said that products traded on the global gold-backed stock exchange exceeded 1,000 tons in September.
Ounce gold was being traded at $ 1,915 at the time of writing.