American Economy Takes Hits and Gold Prices Rise
The bullion rush does not appear to be slowing down, as gold prices marked another day of gains, pushing past five-month highs. While gold prices started Tuesday on a downward trend, the commodity later picked up as U.S. Treasury Bond yields traded at their lowest levels since November 2016. Stocks too have taken a hit in recent days, which is another boon to gold.
U.S. housing data also underperformed, leading analysts to speculate that the U.S. Federal Reserve will be more hesitant to raise interest rates, which would then likely see a decrease in the U.S. dollar value and push gold higher. (Source: “Gold slips, but remains underpinned ahead of French election,” MarketWatch, April 18, 2017.)
Alongside the market pushing gold higher due to a weakening dollar, a stalling U.S. economy, and weaker returns on bonds, continuing political crises continue to plague governments around the world, which is a plus for a risk-management asset like gold.
While the escalation of military action by the United States in Syria has sent some investors flocking to the precious metal, the upcoming French federal election will likely have a large impact on gold prices in the near future. Slated to begin in late April and conclude in early May, the French election has the Front National, a populist, anti-immigrant, anti-European Union (EU) party as a current contender for the highest office in the country. Should the party emerge the victor following the elections in France, the euro will likely be negatively affected, once again prompting investors to seek out gold as insurance.
As the French election heats up, coupled with military actions across the globe potentially becoming a destabilizing factor for a number of major economies, you have a situation that is ripe with volatility which would, therefore, likely boost gold prices.
Expect gold to continue to rise, since these conflicts are unlikely to find a panacea any time soon.