Gold price in euros to record high

The gold price reached a new record of €1,393 per troy ounce this week. Last Monday, that price was touched just after the opening of trading and on Wednesday the price was back at that level. Investors are losing hope for a good outcome to the trade conflict and fear that central banks will therefore turn on the money tap again.

Measured in dollars, the Gold price At the time of writing, it is around $1,540 per troy ounce, the highest level since 2013. With that, the precious metal has broken through several resistance levels. Silver is also catching up. The price of this precious metal has risen from €430 to €530 per kilo in the past two months. That's the highest level for silver since April 2017.

Gold vs Stocks

According to analyst Shyam Devani of Citigroup it is only a matter of time before the gold price breaks through another important resistance. That's the ratio of gold to the S&P 500 index. That ratio is now almost at its highest level in years. If this resistance is also broken, the precious metal could still increase in value by 25% compared to the stock market, according to him.

The chart below shows that the precious metal has become relatively cheap relative to equities in recent years. The lowest point was in September 2018, when the gold price reached a bottom. Despite the 35% price increase that followed, the precious metal is still not expensive compared to the S&P 500 index.

Gold rises in value against the U.S. stock market

Precious metals and government bonds

In recent months, the prices of precious metals and government bonds have risen due to a flight to safe havens. The negative interest rates and the spectacular rise in the price of gold indicate that there is still a lot of uncertainty among investors. Not only about the trade conflict between the United States and China, but also about the stability of the financial system.

The chart below shows that the flight to government bonds is now parallel to a flight to precious metals. From this, we can conclude that the gold market and the bond market have agreed on the outlook for the global economy.

It is therefore not surprising that the Swiss UBS Wealth Management as one of the largest asset managers in the world has now become gloomy about equities. The bank advises its high-net-worth clients to maintain a lower weighting of stocks in the portfolio. The last time this happened was during the European debt crisis.

Gold price versus US 10-year yields