Worries over a possible recession have been growing, and investors flocked last week into precious metals. Gold, in particular, broke it’s previous high and resistance level and ending Friday at the highest level seen since April 2018.
Gold jumped 1.2 percent on Friday morning, reaching a high of $1,361.10 per ounce and ending the day closer to $1,358. The yellow metal has previously fallen after reaching the $1,340s and has struggled to return to that level ever since.
Many experts were previously caught up in the palladium bubble, which was partially dragging gold along with it by association and expected the precious metal to surge past $1,500 in 2019. When palladium fell, so did gold, and while there have been a number of bearish warning signs, recent developments have created the perfect conditions for a flight to safety from investors.
Economic worries have grown after China’s National Bureau of Statistics released new data on Friday that showed the country’s industrial production reached the slowest pace seen in over 17 years.
It’s the latest sign that Beijing’s efforts to force the economy to keep growing are failing, and with it, demand for international goods, commodities, and services will plummet. Other historical indicators, such as the price of copper, also are pointing to weaknesses in the Chinese economy, as the red metal’s price has historically been a direct correlate to a potential decline in Asian economies.
“The thing I want you to think about is what happens to the market and where is the opportunity when gold hits $1,500. It’s going to hit it fast, I mean, it’s up $60, roughly, in the last three trading days, so this move is going to happen quickly, and it’s going to catch people off guard,” said E.B. Tucker, Director of Metalla Royalty & Streaming. “It’s the perfect environment for gold…things are looking good.”
Other concerns affecting the markets include the tensions in the Persian Gulf, with another round of tanker attacks last week pushing the price of oil up further. Around 20 percent of the world’s oil production flows through this crucial area at one point or another. Attacks on these tankers have worried investors about the price of oil, and by extension, the global economy as a whole.
Additionally, investors are anticipating the Federal Reserve to cut interest rates in the second half of 2019, which has been reflected in the value of the dollar. A cheaper dollar often boosts commodities and precious metals like gold. Since these commodities are priced in U.S. currency, international buyers can pay less for the same amount of the asset should the dollar become cheaper in relation to other currencies.
Now that gold’s broken past its previous resistance, experts in the sector have seen a resurgence in optimism, with many going on to say that a surge to $1,400 is inevitable.
While speculators are now keeping their eyes out for gold in the future as another price jump is definitely possible, the biggest winners of gold’s surge have been gold mining companies, whose shares have grown in response to widening profit margins.