Flight to Safety Pushes Gold Price Higher - Gainesville Coins News
No Minimum order! We accept Pay with Credit Card
Call Us: (813) 482-9300 Mon-Fri 9:00AM-6:00PM EST
Login or Register
Log into your account
About Gainesville Coins ®
Billions Of Dollars Bought And Sold A+ BBB Rating 10+ Years No Hidden Fees Or Commissions All Inventory Ships Directly From Our Vault

Flight to Safety Pushes Gold Price Higher

blog | Published On by
Flight to Safety Pushes Gold Price Higher

With each passing trading session, the anxiety about economic weakness and instability seems to spread further and further across the global markets. Who—or what—is the primary benefit of this widespread anxiety? Gold and silver, of course.

Source: Business Insider Source: Business Insider

After a strong showing yesterday, spot gold added another $25 (+2%) on Wednesday morning, leaping above $1,250/oz. This is a fresh one-year high. Meanwhile, silver added 25¢ per ounce to $15.60/oz.

While there are an array of factors that are helping lift the safe-haven appeal of holding gold, the main drivers for this positive movement can be broken down into three main areas at the moment: crude oil, the stock markets, and the Federal Reserve.

Crude Oil

News has been swirling around whether or not Saudi Arabia would coordinate with the rest of OPEC and Russia in order to cut their crude oil production, thus supporting higher oil prices. These rumors, however, have been largely dismissed by the Saudi side, as the country's oil minister has made repeated comments that the country won't be cutting any of its oil output.

Weaker demand from China, with its heavy emphasis on manufacturing and energy-intensive industries, has also placed a considerable drag on the price of oil. Crude oil prices fell again on Wednesday, trading below $31/bbl.

Stocks

market-crashBy and large, shaky stock markets in the U.S. and abroad have been responding acutely to changes in the oil price. These fluctuations have reflected how spooked traders and investors are regarding the slump in the crude market, always a key indicator for economic activity and growth.

There are many observers who believe that last week's bounce-back for equities in the U.S. is actually the "last straw." It could prove that stock indices are reaching a ceiling, and are poised to continue a more general negative trend. In fact, one of the world's preeminent investing advisors, Tom DeMark, has suggested that last week's 5-day rally for the S&P 500 (its best performance so far this year), has pushed the index to "topping out." Could it be all downhill from here?

The Fed

esther-george-KC-fedThere is also the matter of monetary policy. The Federal Reserve has been forced to back-track on its plans to gradually raise interest rates due to the sorry state of the economy, reflected in dwindling consumer confidence. Nonetheless, this hasn't stopped the central bank's governors from trying to talk up the markets the best they can. Esther George (pictured, left), president of the Kansas City Fed, has urged her colleagues to keep a March rate hike "on the table." Betting markets responded by increasing the odds of such an event from 4% to 10%, with an 18% and 28% chance (respectively) for rate hikes at the FOMC's successive meetings.

What Does It Mean for Gold?

super dollarThe combination of these factors, among others, seems to have solidified gold as the "superhero" of the financial markets. The yellow metal has been the best-performing commodity so far this year, advancing an impressive 15% year-to-date. Assets tied to gold, from exchange-traded funds to shares of mining companies, have also generated strong positive momentum in response. Some analysts see an upside as high as $1,400/oz for the metal this year.

 

The opinions and forecasts herein are provided solely for informational purposes, and should not be used or construed as an offer, solicitation, or recommendation to buy or sell any product.

About the Author

Everett Millman

Everett Millman

Analyst, Commodities and Finance
Managing Editor

Everett has been the head content writer and market analyst at Gainesville Coins since 2013. He has a background in History and is deeply interested in how gold and silver have historically fit into the financial system.

In addition to blogging, Everett's work has been featured in CoinWeek, Advisor Perspectives, Wealth Management, Activist Post, and has been referenced by the Washington Post.

This site uses cookies for analytics and to deliver personalized content. By continuing to browse our site, you agree that you have read and understand our Privacy Policy.