Tough Times for Gold

• Gold appears stalled by economic indecisiveness


• Is Gold an autonomous asset?

After a pullback in US stocks helped to support the demand for Gold, it climbed higher on Tuesday reaching its highest level in weeks. Gold has generally managed to maintain an uptrend when we look at the big picture, but lately it has also benefited from the failure of stocks.

Equities were generally trading lower on Tuesday by the time Gold prices reached its peak. But the rally for Gold seems to be over as Gold dropped lower on Wednesday when speculation of a rates-hike expectation and the US Stocks gaining on the trail of generally positive earnings result reduced the demand for the safe haven asset.

This shows that Gold always moves in the direction opposite to risky stocks and also to the dollar, GOLD is now mostly oscillating between highs and lows in recent trading sessions, like the SPX stock which has also shown the same behaviour. This new found confusion can in part be blamed on the looming uncertainty in the global growth.

Meanwhile Silver outpaces Gold's 0.2% decline by a surprising 5.1% growth for this month. Silver which is also being held up by hedging and industrial-use demand held nearly $20 an ounce on Tuesday while softer US Stocks helped support demand for lower-risk precious metals on Tuesday.

Adrian Ash from BullionVault states that "Gold flatlining so far this week proves again that geopolitics [don’t] move bullion prices, not like financial worries can."

 “Gold is waiting for the next round of easing from Japan and then the EU,” said Keith Springer, president of Sacramento, Calif.-based Springer Financial Advisors. “Low world-wide rates will keep U.S. rates at bay.”

Rob Haworth, senior investment strategist at U.S. Bank Wealth Management, forecasts that Gold is likely to remain range bound, with consistent bullish and bearish factors.

“Bearish factors include rising odds of a [U.S. Federal Reserve interest] rate increase, a likely stronger U.S. dollar and economy and some profit-taking by money managers,” he said. “Bullish factors include global geopolitical risks and the likely acceleration in inflation data, especially from stronger U.S. wage growth.”

Despite Gold's more recent short comings, Gold is still being regarded as one of the most attractive commodities for investors as a result of its;

Long-term Profitability

It is still up by 20% over the last year and it also soared to a 2 year high 2 weeks ago, being one of the most valuable safe haven assets, Gold is least likely at risk of losing its value.

Protection against inflation

Gold's tangible nature will not allow its value to be compromised as it cannot be printed at will. Leaving Gold to serve as a hedge against inflation, when investors decide to hold positions in sovereign currencies that might decline in the long run it is advisable to have a standing position in Gold.

Distinction from Other Assets

Gold lacks correlation with any other asset such as stocks, bonds or real estate, further enhancing portfolio diversification for investors as its value has connection with any other asset. This greatly reduces investment risks and promotes returns in times of economic uncertainty.