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The Rush to Gold is On!

Posted by : Premraj | Posted on : Wednesday, January 24, 2018


Gold is the traditional safe-haven asset for traders and investors when equity markets turn south. It seems disingenuous that the gold price is rising, while Wall Street is rallying. Consider the current state of US bourses:

–The Dow Jones Industrial Average is trading at 26,080.72 points for a 1 month gain of 5.36%

–The NASDAQ Composite Index is trading at 7,371.66 for a 1 month gain of 5.92%

–The S&P 500 Index is trading at 2,818.21 for a 1 month gain of 5.03%.

It is worth pointing out that the gold price is currently $1,333.80 per ounce, with a 52-week low of $1,199.70, and a 52-week high of $1,365.80. That gold is trading close to its 1-year high is notable. The performance of gold in recent times is equally laudable:

–Gold has appreciated by 4.54% ($57.96 per ounce) over the past 30 days

–Gold has appreciated by 6.34% ($79.46 per ounce) over the past 6 months

–Gold has appreciated by 9.74% ($118.36 per ounce) over the past 1 year

Experts Weigh in on the Gold Surge

Olsson Capital trading specialist, Henry Wilkins Sr believes that traders are flocking to gold as part of a hedging strategy against the current buoyancy in financial markets.

There is this sense that the elevated levels in the S&P 500, the Dow Jones, and the NASDAQ are too good to be true. Traders and investors are anticipating a downturn in markets, but nobody knows quite when it’s going to come. That the Trump rally has led to a blistering performance on Wall Street is not lost on strategic investors. We must guard against over-optimism by rebalancing financial portfolios to reflect the possibility of a downgrading (adjustments) of share prices. A market correction to the tune of 20% will wipe trillions of dollars off the financial markets.

Traders are likely rebalancing their portfolios to include safe-haven assets like gold. But there is another reason why we are seeing a rush to gold recently. Consider that in Q4 2017, the world witnessed unprecedented growth in cryptocurrency trading. The market was approaching $1 trillion, before major corrections wiped out hundreds of billions of dollars. From a high of over $19,000 per unit, Bitcoin plunged beneath $10,000 in January 2018. That money has found its way into gold coins and gold stocks, and gold ETFs. The gold price has risen 7% since its December low, and we can expect further capital inflows to the precious metal as nervousness pervades financial markets

Gold Gains Favour As Crypto Fades

Indeed, the impact of cryptocurrency-related anxiety has solid underpinnings. The South Korean government recently levied a 22% corporate tax on South Korean cryptocurrency exchanges. Additionally, there is now a 2.2% local income tax being levied on these profits. Since South Korea’s Bitcoin and crypto exchanges are the largest in the world, this has sent speculators rushing for cover. Traders are cashing out of crypto en masse, and seeking other safe-haven financial investments such as gold to plow their money into. Gold coins are now witnessing surging levels of demand, and speculators are seeking stability before they reconsider the prospect of entering the cryptocurrency markets again. Since gold is the traditional go-to asset, it’s now in demand, and there are plenty of call options on gold futures, gold stocks, and gold CFDs.

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