Gold Hits $1,145 but Stock Market Rally Fizzles Out

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"can we now expect a correction in stock markets that temporarily boosts the USD and sends the price of gold down?"

Stock markets around the world appear to be cooling off as the recent rally comes to an end, while the new all-time high of $1,145 for gold is flashing a warning signal as investors back the traditional safe haven.

News that the Russian central bank has acquired a further 30 tons of the yellow metal rather than see it sold on the open market underlines the increasing role of gold as a currency that cannot be printed. Central banks are the money printers so they know this value best.

Dollar Rally

But can we now expect a correction in stock markets that temporarily boosts the dollar and sends the price of gold down?

The relationship between the dollar and gold is not a 100% correlation. If you look back over the past year gold is up 10% while the dollar and euro exchange rate is very similar.

Yet even if the gold price weakened a little, investor demand is so strong worldwide that this would not last long or the gold price fall very far. Too many would see this as a buying opportunity. The Russian central bank would not be alone.

Indeed, the best trade if stocks do finally correct—and markets always do eventually—would surely be to buy gold or even better gold stocks. Silver should also not be ignored. It moves in step with its big sister, and normally exaggerates price movements up and down.

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