Gold prices rose more than $20 and hit a 10-month highs yesterday. Some are saying the catalyst was the World Trade Organization’s quarterly outlook indicator, a composite of seven drivers of trade, reported a reading of 96.3 (a reading below 100 signals below-trend growth in trade).
On the news price breached the daily supply at $1330.
Speculators aren’t the only ones making money/hoarding gold in fear of turbulent times ahead. The central banks are also buying gold.
For some time, global central banks have also been hoarding gold. As a matter of fact, they are one of the world’s largest gold investors, with holdings exceeding 30,000 tons of the yellow metal. Central bank gold purchases for the first ten months of 2018 were 351.5 tons, a 17 increase for the same period the year before. The question is, why are regulatory agencies such as central banks turning into investors?
Gold has historically been a hedge against economic downturns and inflation. Reserve gold is excellent diversification against a devaluing currency, and central banks have taken note. With increasing global uncertainty, gold may be the one certainty that will retain its value. In addition, it is a liquid investment which has a proven throughout history to be a reliable store of value.
The next test for gold will be the multi-year resistance level between $1350 and $1375.
From a macro view the long term 1st target remains $1600.
This post is my personal opinion. I’m not a financial advisor, this isn’t financial advise. Do your own research before making investment decisions.