Gold ended the week up $24.70, closing at $1,280.30—a six month high. The following chart shows the continuous gold futures through December 31, 2018.
Many factors that tend to weaken the U.S. dollar and boost gold are coming into play: a declining stock market, slowing economic growth, and a Fed bump in interest rates that was one raise too many for the economy (yet, maybe the last one for a while).
In addition, the political environment could become even more acrimonious (if that is possible). Add in the run-up to the 2020 election, and the turmoil could be continuous. Gold tends to shine in chaos.
As Barron’s reports, “Gold can also act as a buffer in tough times. While the S&P 500 has tumbled 16% during the past three months, gold has gained 8%, acting as just the kind of hedge against market chaos that some investors hope for when they buy it. …
“That role as insurance from market volatility was also apparent in currency markets. In 2018, gold has outperformed every Group of 10 currency except the yen, the U.S. dollar, and the Swiss franc, observes Société Générale currency strategist Kit Juckes. ‘Fair to say, then, that it’s mixing it with the safer-haven crowd.’ he writes. …
“‘The reason for thinking positively about gold at the moment is that we have deteriorating dollar fundamentals and an absence of reasons to like pretty much any other currency,’ Juckes writes.”
Rick Andrews is president of Avant Capital Management