The prices of gold have recorded the largest decline last week in the last six months, losing as many as four percent of value, which is the most pronounced weekly loss from November.
Ounce of gold (31.1 gram) is now almost ten percent below a record value from April, when it exceeded the $ 3,500 border.
The reasons for such a strong correction of precious metal prices lie in several parallel factors, as follows: reduction of global geopolitical tensions, including trade truce between the United States and China; strengthening the US dollar, which reduces gold attractiveness as an alternative form of conservation of value; an increase in risk appetite, because investors are encouraged by the announcements of economic recovery and mitigating trade barriers; Realization of profits – investors decided to cash in profit after exceptional gold growth since the beginning of the year, which remains an impressive +22 percent and, additional, with optimism in markets, interest in the so-called Safe refuge like gold naturally decreases.
At the same time when gold records losses, stock market indices grow strongly. The agreement between the United States and China on the temporary abolition of customs in 90 days has launched a wave of enthusiasm among investors.
The Nasdaq technological index increased by seven percent last week, while the S & P 500 grew all five days. Positive trends are additionally encouraged to avoid recession – even Barclays, which has recently predicted the fall of the US GDP, now expects its growth of 0.5 percent. In contrast, Moody’s lowered the US credit rating on AA1, due to the worrying public debt height.
Although the market currently dominates euphoria, there are also signals for caution. The Consumer Confidence Index of Michigan University showed an additional decline, while inflation expectations increased by as much as 7.3 percent in the next 12 months – the highest level of 1981. Years. Meanwhile, some companies like Walmart warn of possible product prices due to tramps’ customs, while others – like First Solar – grew strong growth thanks to tax relevant energy.
In short, the market is located in the transitional moment: optimism pushes actions to the top, while gold – a symbol of caution – temporarily concesses the place in euphoria.
However, how trade negotiations and geopolitical tensions are developed, the balance can change quickly, the banker appears.
