Political Developments Sparked a Gold Rally This Week
Gold ended the week around $1,275 after climbing over $1,285 earlier in the week. Political developments sparked a gold rally that broke the rut that gold has been stuck in the last few weeks. Some of these political developments driving the rally were overseas, and some domestic.
On the international stage, Saudi Arabia is undergoing a very interesting shake up in the power structure. This past week, over 200 people were arrested on corruption charges. This number includes eleven princes and thirty-eight government officials and businessmen including billionaires, the head of the National Guard, and the economy minister. Observers are noting that it appears to be a power move by Crown Prince Mohammed Bin Salman to consolidate his position.
Furthermore, there are indications that Saudi Arabia and Lebanon (and by proxy Iran) are escalating tension. Saudi Arabia ordered its citizens out of Lebanon, and Hezbollah Sayyed Hassan Nasrallah warned that The Kingdom has declared war on Lebanon. This was after the Lebanese prime minister flew to Saudi Arabia and unexpectedly announced his resignation. Iran-backed Hezbollah accused the Saudis of holding him against his will. Yemeni rebels also launched missiles at Saudi Arabia, which Saudi Arabia has accused Iran of providing.
What this means for investors: Gold initially jumped more than 1% on geopolitical risk and safe haven buying as it always does with major events like these. Keep an eye out for more news on the escalation in bellicose rhetoric in the Middle East.
Greenback Up Earlier in the Week, Metals Down
At the beginning of the week, the dollar was on a strong tear again. Its strength was keeping gold down at the beginning of the week. On Thursday, however, the dollar index weakened, and gold prices saw an uptick. The stock market also fell Thursday on news in domestic politics.
In U.S. politics, the Senate Republicans revealed their tax proposal on Thursday. Last week, the President’s announcement about the proposal led to a stock rally. This week, it did the opposite as it delayed corporate tax cuts until 2019. Investors also started to worry that the reform plan wouldn’t pass. This boosted metals prices at the end of the week.
What this means for investors: With the upcoming fight over the tax reform plan, there will likely be more volatility entering the markets that could lift gold prices. There are other reasons to remain bullish for gold as well. Some analysts and traders are predicting that Federal Reserve won’t actually raise rates in December. This could be positive for gold and silver prices going into 2018.
Cryptocurrency Locked up after Coding Error
There has been a great deal of discussion about gold vs. bitcoin lately and how they compare as a safe haven. Cryptocurrencies are subject to some major glitches though, as this week proved. $300 million of cryptocurrency Ethereum disappeared in the blink of an eye due to a coding glitch. It appears it was a simple mistake by a user who accidentally had it transferred to himself, deleted lines of code to reverse the transfer, and instead deleted hundreds of millions of dollars of the currency.
What this means for investors: Cryptocurrencies certainly have their appeal, and investors have made fortunes off of them. But they are not winning everyone over. Other analysts are warning that it is simply a bubble that is growing too big too fast and will eventually die out. Gold is real money though, and will continue to be. You can’t simply delete its worth with a few clicks. Tangible gold and silver will always have value.
Counterfeit Gold Scarily Convincing
Recently, a sealed, stamped Royal Canadian Mint 1 oz. gold bar was revealed to be a counterfeit. It was such a convincing counterfeit that even a branch of the Royal Bank of Canada (from where it was purchased) had certified it. Investigators are still trying to get to the bottom of how it passed certification there, and how such a convincing packaging was created. It’s certainly not the first time either that extremely convincing looking bars have hoodwinked jewelers and dealers.
What this means for investors: Be cautious when choosing a dealer. Look for companies and dealers who have extensive, specialized experience in appraisal and can more easily detect counterfeits.
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