The recent shift in central bank (U.S. Federal Reserve and European Central Bank) policies denotes a change in the macroeconomic environment that brings new levels of risk to the financial system. Central banks see a downturn coming. However, many investors believe they have limited ability to fight a recession with U.S. interest rates already at 2% and European interest rates below 0%. In addition, quantitative easing has lost its efficacy. Layer on global trade and geopolitical tensions, and it is not hard to imagine a "flight to safety" that moves gold much higher.
The U.S. stock market’s blind faith in the Fed's policies is pushing the market back to its highs. This makes the market vulnerable to weak economic news or any signs that indicate the Fed is unable to curtail a downturn. We believe any stock market selloffs should further propel gold as investors move away from risk.
Gold Price (2008 to 2019)
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