How Are Global Tensions Going to Affect Gold? Oil Outlook Darkens Markets

25 Jun
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How Are Global Tensions Going to Affect Gold? Oil Outlook Darkens Markets

Gold Market Discussion

How Are Global Tensions Going to Affect Gold?

world tensionsGold had some pull back at the start of the week, but closed out the week making back some gains. However, going forward, there are global tensions going to affect gold, most likely. Although lately gold has at times been fairly quiet on the volatility trade, there are some events to watch for. There were glimmers of fear in the market Tuesday from some of these events that lifted gold.

Brexit negotiations got off to a rough start. Britain, it seems, wants to foremost discuss retaining trade deals with Europe, while EU officials appeared unlikely to indulge this request. On the domestic front, opposition to President Trump’s proposed reforms to taxes, regulation, and health care sent some volatility into the markets, as it seems uncertain as to the likelihood that they will succeed.

Tension and conflict in the Middle East seems to be escalating rather than resolving. The U.S. shot down a Syrian government plane, Iran launched a missile offensive against ISIS in Syria, and Russia warned the U.S. that planes could be potential targets. Qatar has been diplomatically isolated from the rest of the Arab world, and Saudi Arabia chose a new crown prince. With these developments, uncertainty is certainly mounting rather than abating.

What this means for investors: Gold seemed to shrug off its pull back from last week that the Fed’s raising of interest rates prompted. As the gold market indicated at the end of the week, some investors are preparing now with safe haven assets against market downturn that global events could trigger.


Oil Slump Darkens Markets, Boosts Gold

oil slumping again Oil is in a bear market, and its effect is weighing on the stock market. It’s partially the oil slump that shored up gold on Thursday. Oil is down 20% this year now due in part to over production in places like Libya. The slump is making the Fed and investors fearful that inflation targets won’t be met and that economic growth is not going to to be robust. Usually rising inflation is good for gold, but its stifling in this case means slow growth for the economy, which makes investors cautious.

What this means for investors: With the energy sector taking a hit, investors will be rotating out of that sector and into metals. Bond yields are also falling, as we have mentioned before, and this will spur safe haven demand for gold over bonds.

Retail Armageddon Telling Another Story about the Economy?

retail slumpingRetail is taking repeated hits recently, which is rocking the stock market. In May, retail sales had their biggest drop in 16 months. Names like Amazon are doing well, but other major retailers and department stores are seeing massive drop offs in sales.

What this means for investors: The retail slump is worrying because it shows that the economy has a sense of some consumer fear. People are reluctant to spend right now with the outlook fairly uncertain. It also means with less consumption, there will be slower growth and inflation most likely.

Gold to Silver Ratio Still Showing Positives for Silver

watch the gold to silver ratioWe’ve talked before about how the gold to silver ratio is at historic lows. This trend is persisting. During the metals pull back and sell off last week, silver did not dip below $16, which investors are seeing as a positive sign that silver has support and a ways to climb.

What this means for investors: Falling bond yields, oil prices, and stocks will lend support to silver as well as gold. Some investors are more bullish on silver than gold right now. With both metals, buy on dips, sell on highs. Silver pulled back after the Fed  announcement, but made back some gains with gold.

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 Here are some articles from the web discussing the topics in this week’s post:

How Are Global Tensions Going to Affect Gold?

Read Here

Oil Slump Darkens Markets, Boosts Gold

Read Here

Retail Armageddon Telling a Different Story about the Economy?

Read Here

Gold to Silver Ratio Still Showing Positives for Silver

Read Here

 


As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at  602-955-6500 or toll-free at 877-354-4040.

“I’ll be keeping a sharp eye on the market and I encourage you to do the same!”

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