Price of Gold Depends on Global Stability in the Immediate Future, Could Shoot Up in the Long Run

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Gold Dec 17 (red line) vs. Dow Jones Industrial Average in 2017, YTD

Ukrainian Credit Union.

Gold is considered to be a “safe heaven” asset and as such should theoretically move in the opposite direction with such risky assets as stocks. So far this year, US stocks (as represented by Dow Jones Industrial Index) and gold have both brought rather strong returns, above 10% each.

Lately, the tensions around North Korea have kept stocks under pressure while causing a small rally in the price of gold. Monday, September 11, was quite characteristic for these assets’ movements: in the absence of bad news from North Korea, gold dropped while stocks soared, also supported by the fact that Hurricane Irma did not hit Florida as strongly as had been expected.

Current forecasts for gold differ: Carsten Menke, commodities research analyst at private bank Julius Baer (via cnbc.com), downplays the global security concerns and thinks that given the solid expectations of economic growth in the United States and the outlook for higher interest rates, the U.S. dollar is likely to rise higher which would drive the price of gold lower.

On the contrary, markets expert Jim Rickards (via thestreet.com) expects that gold will continue going higher and could eventually could go much higher from the current price of about $1,340 an ounce. “I’m just looking down the road and you can see that war is coming,” he told Kitco News.

Quite likely, the immediate future will tell who of these two experts is right.

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