Is this the uptrend in gold we’ve been waiting for? - July 01, 2019

Is this the uptrend in gold we’ve been waiting for?

We were expecting an upward turn for gold for a while, and now it seems it might have come at last. The precious metal’s price started to be bullish and in the last weeks it’s on a serious rise. The global market environment, especially central bank policies and other outlooks are certainly in a right position for gold’s rise.

It seems that gold started to be rather bullish in the last weeks. Since May, it went from being $1284 to $1417 until last Friday. That’s more than a 10% jump in less than two months, and the trend may not turn around in the foreseeable future.

Gold Futures since May 2019

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Not an unexpected turn

This behavior is far from unexpected for those who keep an eye on gold. In the last three years we’ve seen gold, and precious metals getting traction and trying out their wings. We believe that this was a buildup to a bigger jump in prices. For a while now, we (and others, like JPMorgan) are expecting this turnaround. (See: Gold: price falls, popularity rises.)

Gold Futures since December 2017

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Global financial policies support gold market

This turnaround in gold has very firm foundations. The most important is an expected rate cut from the US Federal Reserve and European Central Bank. (In Europe, QE programs may also be relaunched to stimulate economy.) This may also mean a longer change in central bank policies which could define upcoming years.

Why is this so important? Because low rates mean low, or even zero returns on classic savings and bank accounts. If this happens, people tend to turn to other investments like stocks, commodities and, well, precious metals. This means higher demand for gold, too, which usually leads to higher prices.

The political environment also strengthens gold

Demand for gold is already super high in some ways. Governments (especially China and Russia) are heavily investing in it. Gold reserves are going higher and higher by the year as more and more countries are trying to diversify away from the US Dollar. (See: Gold is still getting more popular.)

There are also some worries in the global political field which further support gold. The reason is simple: the precious metal is a safe haven for investors. Whenever there is something uncertain on the markets (let that be stock price fluctuations or other) they turn to gold, which equally means higher demand, therefore higher prices.

What to do with gold?

We expect that this jump in prices is another test for gold. Prices may not go further immediately, but after a small rest, the rise could easily continue. This is also true for other precious metals, like silver, in the upcoming years. And although we mainly focus on stocks and precious metals in our blog, commodities like cocoa, coffee, soy, and wheat may also have a bright future.

Disclaimer: This analysis is for general information and is not a recommendation to sell or buy any instrument. Since every investment holds some risk, our main business policy is based on diversification to minimize threats and maximize profits. Innovative Securities’ Profit Max has a diversified portfolio, which contains liquid instruments. This way, our clients can maintain liquidity, while achieving their personal investment goals on the long term.