Gold price hits highest level in four months

The gold price rose to €35,000 per kilo today, reaching its highest level in four months. The precious metal is benefiting from stock market turmoil and the impasse that has arisen regarding the Italian budget. In recent weeks, the US stock market has lost all of its gains this year, while stock markets in Europe are currently even lower than the level of the beginning of this year.

Investors are concerned about rising interest rates and the ongoing trade conflict between the United States and China, which has left the outlook for global economic growth uncertain.

The correction in the stock market may have been less severe than the one at the beginning of this year, but the difference with then is that there is now almost no recovery rally. The US S&P 500 index fell through the 200-day average this week for the first time in 2.5 years, which is seen as a negative signal by technical analysts. Investors are therefore looking for safe havens, which also include precious metals such as gold and silver.

Gold price back to level of four months ago

Gold benefits from weak euro

The increase in the Gold price of recent weeks has been exacerbated by an exchange rate effect, as the problems with the Italian budget weakened the euro against the dollar. Since the end of September, the price of gold in dollars has risen by 4.5% to $1,235 per troy ounce, while the price of gold in euros rose by 7.2% in the same period to almost €35,000 per kilo.

The precious metal therefore turns out to be a good hedge not only against turmoil in the stock market, but also against a depreciation of the currency. It is striking to see that the rise in the gold price this time is not accompanied by weakness in the dollar, as it usually is. From this we can conclude that gold is currently behaving as a fully-fledged safe haven again.

The strength of this rally in gold is striking, because a month ago the precious metal in euros reached its lowest price level since the beginning of 2016. Silver prices have also risen somewhat in recent weeks, but seem to be benefiting less from the flight to safe havens.

This contribution was made from Geotrendlines