Commodities & Metals

Gold Becomes Hugely Attractive as Other Assets Falter

Douglas A. McIntyre

Published: December 17, 2018 6:15 am

Last Updated: January 11, 2020 1:39 pm

Gold often has its day as an investment when other markets become dangerous. That time has come again. Assets classes from equities to fixed income, from commodities to real estate, have been shaken by a slowing economy and worry that global trade disputes could mute GDP improvement worldwide.

Gold already has rallied somewhat this year but should move toward its 52-week high soon. At $1,242 an ounce, it trades well above its 52-week low of $1,173 and below its $1,398 peak for the period.

What might have become higher interest rates across most of the economy is less likely, which will increase gold’s attractiveness. As the Federal Reserve frets over a slowing economy, the yield on bonds, which was expected to rise, may not do so. Fixed income as an investment asset class is in trouble.

The decade-long rally in equities likely is over. After a run-up that has been unprecedented, the equity markets have flattened, and most indexes trade in bear territory. The increased value of equities since the first of the year has been wiped out by major sell-offs. Worsening earnings and a slower economy are forecast by many experts as reasons the stock markets may sell off throughout next year.

Home prices also ran up from the end of the Great Recession. However, real estate prices in some of the hottest markets in California, Florida and Nevada have begun to fall. For investors who flip homes and homeowners who count on home equity as the primary source of their net worths, a drop could reset the market back to where it was two or three years ago.

MarketWatch recently reported:

 Gold prices rose “in the wake of a U.S. jobs report that did not meet market expectations on the key jobs-growth component,” said Jim Wyckoff, senior analyst at Kitco.com, in a daily note.

“What is arguably the most important U.S. economic report of the month, the Labor Department employment situation report for November, saw the key non-farm jobs number come in at up 155,000, which was well below the consensus forecast of up 198,000,” he said.

If jobs are the signature measure of a strong economy, investors will continue to look to one of the oldest safe havens.