As global equity markets tumble, many analysts say it could be time for gold to shine once more as a safe buy in times of market turmoil. Spot gold prices are hovering just below $1100.00 per troy ounce as I write this, reflecting a modest 1% increase since January 1st. However, that 1% increase would look extremely appealing to those holding equity based portfolios. Gold prices recently topped $1100.00 for the first time in over two months as the dollar fell in response to concerns over both the Chinese economy and weaknesses within our own economy.
There are numerous reasons that Gold could be at the very least a stable investment option this year. They include but are not limited to; extremely volatile equity markets, escalating tensions in the Middle East, and military related instability in both North Korea and Iran.
Gold’s recent stability and strength amid broad ‘risk off’ sentiment could renew investor interest. Gold is currently holding above its 50-day moving average in spite of a relatively strong US dollar, helped by lower US yields and physical demand.
During times of financial uncertainty and geopolitical turmoil, investors funnel money into assets that benefit from ‘risk-adverse’ sentiment or act as a store of value. Whether gold can be considered a safe haven may be subject to debate. However, gold prices have recently risen despite China’s economic slowdown, escalating tensions on the Korean peninsula and the significant downturn in global equity values. With so much uncertainty, demand for gold as a tangible safe haven asset is again on the upswing.