Gold has once again become the safe haven of investors. Yellow metal surpassed $1,300 on Friday, the highest since November last year. The rise comes at a time when the stock markets have suffered losses, in which the White House lives days of instability and after the terrorist attacks in Barcelona.
“There are clearly more factors for the markets to be concerned about,” said Jens Pedersen, referring to political uncertainty in the US and terrorist attacks in Spain. “This has led to a risk-averse environment that is favorable for gold,” he noted.
Doubts about Trump and Fed uncertainties pull for gold
Instability within the Trump administration fears that the president will not be able to implement his economic agenda, which at the end of last year strengthened the stock markets and shined gold. Trump faced resignations from several council members who disagreed with the president’s hesitation in frontally condemning the violent acts of extreme right-wing groups and white supremacists in Charlottesville.
And rumor emerged on Thursday that its top economic adviser, Gary Cohn (former Goldman Sachs number 2 and seen as a candidate to succeed Janet Yellen at the Fed) could also file his resignation. The market interprets these developments as a sign that Trump’s ability to implement his economic agenda will be further diminished.
In addition, the minutes of the last US Federal Reserve meeting released this week show that policymakers are divided over the outlook for inflation and the pace of rising interest rates. In theory, a slower normalization of rates would be beneficial for gold.
“Discord in Washington may benefit gold as it puts additional pressure on the dollar at a time when the Fed has cast new doubts about the sequencing of interest rates,” said Edward Meir, an analyst at INTL FCStone.
$1,300 mark supports yellow metal
Although it has surpassed the $1,300 threshold early Friday, gold pulled back to settle at $1,291.60 an ounce. The high of the day was $ 1,306.90. In recent weeks, analysts had come to indicate that the $1,300 mark would be important to keep gold on a rising trend.
“The selloff is unusual as there was no data or market news to account for the [roughly] $15 drop” from the day’s highs, said Mark O’Byrne, research director at GoldCore. “Risk aversion has eased with stocks eking out small gains [at the time of gold’s settlement] and some traders may have decided to take profits at the $1,300 level.”