Gold Rally Continues on Safe Haven Demand – Should Investors Be Preparing for Black Swan Events?

26 Mar
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Gold Rally Continues on Safe Haven Demand – Should Investors Be Preparing for Black Swan Events?

Gold Market Discussion

Gold Rally Continues from Last Week’s Jump

Gold coins saved

Last week’s gold rally continues this week with gold toying with the $1,250 mark. Gold is now up 8.5% this year. On Tuesday, the Dow had its worst day yet in 2017. It experienced some shakiness after the Fed announcement last week, and volatility rocked stocks this week. Fear is entering the markets right now, and investors are looking for safer options. Silver is moving in conjunction right now, and some analysts think it is poised for a rally as well.

What this means for investors: A couple things were giving the markets jitters this week. Congress was locked in a feud over President Trump’s health care bill with opposition on both sides of the aisle. Notably, the vote was originally scheduled for Thursday and got postponed with concerns that it could not pass. Hence, on Friday, the markets plunged prior to the schedule vote. Finally though, the bill was pulled Friday afternoon, which triggered a stocks rebound. The President has indicated that the next step for the administration will be tax reform rather than health care.

Furthermore, Britain announced officially that March 29th would be the date (as suspected) of triggering the process to begin Brexit. EU Commission chief Jean-Claude Juncker anticipates that the exit from the union will cost Great Britian $50 billion.

There are some factors that could hold back precious metals prices in the near term. Crude oil prices are in a slump, and these tend to have a negative pull on gold. While the gold rally continues, some investors are also profit-taking this week. However, long term, there are enough uncertainty factors that safe haven demand for gold and silver is going to continue, and we expect a volatile climate in which the gold rally continues.

Black Swan Events that Could Shake the Markets

black swan events

Black swans are events that are unforeseen and deviate from what is expected. While the events impacting the markets this week (health care bill, Brexit vote, etc.) are not unpredictable enough to be dubbed “black swans”, they are helping to further an air of uncertainty in the markets that is putting the fear of black swans into some investors.

Events in history that are more aptly described as black swans would be the financial crash during the housing market crisis of 2008 or the 2001 dot-com bubble. These were events that impacted investors on a massive scale due as much to their unexpectedness as their fundamental disruption to the markets.

What this means for investors: Non-financial black swans can also influence the markets. Events like the lone wolf terror attack in London this week and upset elections cause market volatility. Since the nature of black swans is, obviously, that they occur unexpectedly, it is impossible to ever plan perfectly for them. However, a portfolio diversified into gold ahead of time (even if there is no immediate fear of a crash) sets many investors at ease.

G20 Finance Ministers Reverse Position on Trade Protectionism

G20

The finance ministers of the G20 nations met this week. The statement – usually unremarkable – that came out of the summit caused a stir. The ministers historically dropped a decades long pledge that rejected protectionism. The bloc of nations has always ended these summits with a statement that rejects any tariffs or rules that favor one country’s economy over another, but that was missing this time around. This was due to pressure from the U.S. Secretary Treasury Steve Mnuchin strongly indicated that the U.S. full intends to forward with the trade policy campaign promises from Donald Trump that could possibly include border taxes and import tariffs in an effort to spur U.S. manufacturing.

What this means for investors: While the promise of reviving U.S. manufacturing is an attractive one, some of the proposed trade policies may not necessarily achieve this goal. Looking back at history – particularly President Hoover’s administration – there are some important lessons to learn about protectionism and trade wars. Read more about the impact on the economy and markets.

OECD Warns about Global Economic Growth Projections

OECD Conference Centre in Paris
OECD Conference Centre in Paris

The Organization for Economic Cooperation and Development (OECD) is not optimistic about global growth projections. Every year the organization (comprised of 35 member nations that focus on stimulating economic progress and world trade) releases a report on a general global growth outlook. The report this year was more optimistic than last year’s, yet it still anticipated slower than ideal growth prospects.

What this means for investors: Political instability is a major factor that could undermine growth, according to the report. It also pointed to some shaky fundamentals in the markets and protectionist trade policy. It is most significant that although the report was not warning of crisis-level threats, there is a real concern of swift derailment of the modest pick-up in growth.

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

Gold Rally Continues from Last Week’s Jump

Read Here

Black Swan Events that Could Shake the Markets

Read Here

G20 Finance Ministers Reverse Position on Trade Protectionism

Read Here

OECD Warns about Global Economic Growth Projections

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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