Gold closed the week at $1,255.60/ounce, as it continues to trade above its 200-day moving average of $1,252.00/ ounce – a bullish technical indicator for gold.
For the last three months, gold prices have risen over 4%, as investors have moved to the yellow metal for safe-haven protection during the recent stock market declines of over 10%.
On Sunday, Secretary of the Treasury Mnuchin even called the heads of the six largest U.S. banks to shore up confidence in the U.S. financial system amid the recent market turmoil. The Treasury then released the following statement: “The banks all confirmed ample liquidity is available for lending to consumer and business markets.” Not very reassuring…
Many analysts now see the turmoil continuing and providing a favorable climate for gold investment as a safe haven in the coming year.
Yahoo Finance reports, “Mikhail Sprogis, Goldman Sachs precious metals analyst, said the firm believes safe-haven trades like gold will continue to rise next year, whether or not the economy actually slows down. ‘Our bullish outlook is driven by the expectation of a pickup in “fear” related investment demand for gold as the U.S. economy slows down and late cycle concerns mount. Even though we as a bank think that this cycle has room to run, this doesn’t prevent people from becoming increasingly afraid,’ he told Yahoo Finance.
‘We expect three rate hikes next year versus consensus of one to two. We think that this will not prevent gold from increasing. Moreover, we would like to highlight that negative correlation between gold and 10-year real rates tends to reverse during late stages of the hiking cycle as higher rates themselves can lead to increased financial market volatility and growth slowdown concerns,’ Sprogis said.” (Emphasis added.)
Rick Andrews is president of Avant Capital Management