As Stock Markets Plunged, Gold… Didn’t Rise

Stock Markets
As Stock Markets Plunged, Gold… Didn’t Rise

With stock markets down the expected gold price growth hasn’t happened yet. Is gold losing its appeal?

As Federal Reserve Chairman Jerome Powell declared on Tuesday in his first testimony to the House financial services committee that there could be four small U.S. rate hikes this year, beginning in March, the metals markets reacted negatively as well as U.S. Treasuries and the stock market, while the U.S. dollar index felt stronger.

Precious metals, often pegged to dollars, tend to fall when the dollar grows stronger. The reason is that a weaker dollar makes metals cheaper for investors using other currencies.

While inflation generally supports gold buying, rising interest rates would make the metal less attractive because bullion pays no interest.

If you take a look at the performance of gold in other currencies, it may also be disappointing: look at prices in the euro, the pound, the yen and the yuan this year—they’re all down.

Gold’s pullback has reflected on shares in major gold miners.

Is Gold Too Traditional and Boring?

It’s difficult to imagine somebody getting a kick out of investing in gold. There are many more reckless opportunities around today, take, for example, a mad advance of all kinds of cryptocurrencies with bitcoin demonstrating a most dazzling head-spinning roller coaster journey recently.

“While you’ve had the cryptocurrencies, you’ve had cannabis, you’ve had all kinds of industry exploding and the gold price flat, it’s like watching paint dry. Why would anyone get excited?”

Pierre Lassonde, the chairman of Franco-Nevada

“The cryptocurrency fad seems to have added a new layer, as the new ‘digital gold’ stole some of the ‘real gold’ thunder. But given the uncertainty and security issues, it has a way to go in order to replace the old shiny metal,”

Todd Colvin, a gold analyst and broker with Chicago-based Ambrosino Brothers

Read the full story in The Globe And Mail