The economy may still be growing, but it’s certainly seen better days; an ongoing trade war between the United States and China coupled with worrying signals emanating from elsewhere have resulted in more commercial pandemonium than many investors would like to admit. Despite current market jitters, however, there are reasons to believe that certain developments, such as the weakening dollar, could end up benefiting certain assets like gold.
Wil the current market tumult prove to be beneficial for the valuation of gold? Here’s an analysis of the gold’s current prospects amidst the international economic upheaval.
Don’t count gold out just yet
Many investors and economic analysts are entirely too dismissive of gold as an asset; while some people can certainly overinflate the value and importance of gold as an economic investment, it’s long been recognized as one of the soundest means of storing wealth available to most people. These days, with the dollar showing signs that it could be struggling, investors in gold are happier than ever before with their previous decisions. Things could yet prove to become even better for gold, too, though a diverse number of economic developments continue to threaten the overall wellbeing of the international market.
While China and the United States have tentatively announced some sort of agreement on the early stages of a trade settlement, the truth of the matter is that the geopolitical situation driving the ongoing feud isn’t likely to abate anytime soon. With the American president facing an ever-growing impeachment inquiry and Chinese actors unlikely to back down in the face of domestic pressures, certain market jitters emanating from trade uncertainty and political polarization will continue to plague the dollar’s valuation for some time yet. All the while, this will wreak havoc in many senses, but it could prove to be a boon to gold owners at the same time.
We’ve already seen gold spike upwards when recession fears were high earlier this year. With the president currently trying to encourage the Federal Reserve to stimulate the economy in a time of fair growth, some investors and analysts are reasonably beginning to regain their old recession fears. As long as many market actors continue to fear that economic turmoil could be around the corner, gold will remain incredibly valuable as a long-term means of storing wealth. As disappointing and disheartening as it can be in a broader sense, then, current economic woes can nevertheless be capitalized upon if they’re reacted to carefully.
Keep an eye on the dollar
Ultimately, gold’s valuation and the interest that investors show when it comes to scooping up more of the precious metal will likely be driven by the overall health of the dollar coupled with the political prospects of the United States. An ongoing political debate across the nation has coupled with uncertainty to produce gridlock that’s paralyzing markets in many senses, but overall growth continues to bolster the American economy in these troubled times. It will thus be of the utmost importance to keep a close eye on the health of the dollar at all times, as sudden political developments in the United States or elsewhere could seriously impact how eagerly some begin to invest in gold.
When using resources like Forex Academy to monitor the price of gold and overall economic trends, remember that market developments can’t be separated from political events. Private investors, government actors, and major companies will all be paying close attention to world leaders and ongoing negotiations when gauging their decisions. A political environment that will likely lead to a lower dollar and more diminished American presence in international treaty negotiations will have the upshot of generally bolstering the overall value of gold.
Given that President Trump has been arguing for a weaker dollar to spur additional spending for months now, and that he’s leaning heavily on the Federal Reserve to make his wishes into a reality, it stands to reason that market conditions in the near future will continue proving favorable when it comes to owning gold. All portfolios should always be well-diversified, of course, but in times of ceaseless political tumult and gross economic uncertainty, physical assets that have a historical tendency to remain valuable even in times of crisis are worth investing in.
Don’t have endless faith in gold, however; some analysts can persuasively argue that trade wars don’t always benefit gold. Volatility, after all, is never an easy thing to control by definition. That’s why investors prefer stability more than anything else, even if growth is lackluster. Nevertheless, many historical lessons teach us that gold benefits tremendously when other assets like the dollar are struggling. As the current market tumult continues well into the future, those who have been dismissive of gold should consider re-evaluating the asset in light of current conditions.