The investors generally prefer investment into gold because of the general tendency of the investors that its safe store of value whenever the political uncertainty negatively impacts the stock markets. Globally, there are a number of factors which have been factored in the equity markets. The trade tensions between China and the US is one of the primary reasons which are impacting the investors’ sentiments. Other global concerns include stronger US dollar (a concern particularly for the emerging economies) and higher yields. The Federal Reserve’s highly optimistic outlook for the US economy has raised the hopes of the global players that the interest rates are likely to move northwards.
The recent increase in the gold prices and other precious metals still reflects that its prices are lower compared to the highs which were witnessed in April. This decline compared to April is being encountered primarily because of the market participants decision of making deployments towards the US dollar. The demand for the US dollar increases whenever a rate hike by the Fed is expected and hence, as this hike is widely anticipated by the markets in December meeting, it would not be wrong to say that the dollar might witness a rise moving forward. However, in the short-term, the gold prices might witness positive momentum amid weaker global cues, trade worries as well as geopolitical tensions. The emerging economies also witnessed a strong downturn in the recent months on the back of higher US dollar. India, for example, has witnessed a strong downtrend in the currency and was negatively struggling a lot in recent months because of the US dollar appreciation as well as its dependency on the oil imports.
In addition to all these, the report published by the international monetary fund or IMF further accelerated the downtrend. The report stated that the global economy would be adversely affected if the trade battle does not stop as soon as possible. These types of uncertainties restrict the global growth because the consumer and business demand gets derailed. The oil prices have again witnessed a rise on the back of lower US inventory as well as concerns between Saudi Arabia and the US.
The oil prices have witnessed a strong upward momentum in 2018 as the market expects that the demand might rise which would lead to supply shortages. This is because sanctions imposed by the US on Iran are expected to get implemented next month. However, the OPEC as well as its allies are expected to improve the production levels, still there are concerns looming. However, the geopolitical tensions might reduce if the meeting between the US and China, which is scheduled to be held next month, ends on a positive note.
Bottomline, investors which are planning to make investments in gold need to think about their tenure. In the short-term, gold prices may rise but in the medium and long-term the market players might be more interested in making investments in the US dollar because hike in the rates expectations. Nevertheless and on equity parlance, some gold stocks with strong fundamentals can still be vouched for as these may be able to withstand volatility even in the longer run. Lately, spot gold was noted to be flat at USD 1226.59 per ounce.
The Income available from dividends remains attractive for many investors.
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