Gold’s turnaround from outcast asset to portfolio darling has occurred over just the last 4 months. With the advent of the FED rate hike cycle, the inflationary hedge that gold had offered since the credit crisis of 2008 was no longer deemed necessary, which can be seen vividly from the move lower to $1044 around the start of December last year. Since then there has been a 21% increase, very recently making a cycle high of $1263. But what is the main catalyst for this recent move higher?
The relatively new phenomenon of negative interest rates, in my opinion, is the main catalyst in changing how gold is perceived. As various central banks try to boost their individual flagging economies, negative interest rates are the current tool to achieve this and the Bank of Japan, the ECB and the Swiss National Bank all opting for this measure. The consequence of this is that gold becomes much more attractive in investments terms, as investors can’t leave deposits in the bank and because central banks are printing more money.
Jordan Hiscott, Chief Trader
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