HAVE YOU LEFT THE GOLD BEING A SAFE HAVEN?
HAVE YOU LEFT THE GOLD BEING A SAFE HAVEN?
If one thing investors have realized in the first two weeks of the year it is that the global economy is more uncertain than originally thought position. With growing uncertainty and oil to the lowest levels in recent years, investors are fleeing to safe havens. But unlike previous periods of high volatility, gold is not the asset that are coming.
The currency and the US economy are still seen as one of the most stable and reliable investment in the world
Interestingly, the US dollar has been the safe haven for investors concerned. Part of its appeal is from the decision of the Federal Reserve to raise interest rates over the next 12 months. The currency and the US economy are still seen as one of the most stable and reliable investment world. On the other hand, the slowdown in China has only helped increase the value of the dollar, while the fall in demand for raw materials is taking its toll gold.
Interestingly, the US dollar has been the safe haven for investors concerned. Part of its appeal is from the decision of the Federal Reserve to raise interest rates over the next 12 months. The currency and the US economy are still seen as one of the most stable and reliable investment world. On the other hand, the slowdown in China has only helped increase the value of the dollar, while the fall in demand for raw materials is taking its toll gold.
Also read: China and the Middle East tensions push gold, which again becomes a safe haven
When markets fall in times of economic uncertainty, investors tend to flock to assets that retain their value over time despite the ups and downs of the financial markets. Traditionally, these values have been the commodities (raw materials) and mainly gold.
When markets fall in times of economic uncertainty, investors tend to flock to assets that retain their value over time despite the ups and downs of the financial markets. Traditionally, these values have been the commodities (raw materials) and mainly gold.
In the last year gold has fallen around $ 200 per ounce to $ 1,100
In the past year, however, gold has fallen around 200 dollars per ounce, up $ 1,100, and no signs that the fall will end soon. The collapse of oil prices seemed to temporarily increase its attractiveness, but short-lived rally was quickly overshadowed by global macroeconomic concerns, such as the growth of China.
Read also: China will maintain control in the bag to "take care" of the "regular" investors speculators
These news are prompting investors to seek riskier assets in order to generate returns, thus avoiding the low returns offered by gold.
In the past year, however, gold has fallen around 200 dollars per ounce, up $ 1,100, and no signs that the fall will end soon. The collapse of oil prices seemed to temporarily increase its attractiveness, but short-lived rally was quickly overshadowed by global macroeconomic concerns, such as the growth of China.
Read also: China will maintain control in the bag to "take care" of the "regular" investors speculators
These news are prompting investors to seek riskier assets in order to generate returns, thus avoiding the low returns offered by gold.
However, the risk and the demand for gold is not the main causes behind the fall at this time, the main reason is the low inflation that is currently recorded in most developed economies. To that gold can fully develop their potential as a safe haven not only has to be a greater market volatility and global economic uncertainty, there must also be rising inflation that threatens to dilute the value of the currency.
See also: Oil accelerated their falls and leaves the Brent front precipice of $ 31
See also: Oil accelerated their falls and leaves the Brent front precipice of $ 31
Why gold does not rise
At this time, the US Treasury yield to 10 years is about 2%, while inflation recorded by the CPI stood at 0.50%. That makes the real rate of return is 1.5%, a figure that causes assets like bonds more attractive than commodities.
For gold became a reality as a safe haven, inflation would have to exceed 2%
For gold became a reality as a safe haven, inflation would have to exceed 2% in order to generate a real rate of return of negative Treasury. If that were to happen, then we would see that gold will quickly appreciate as investors seek to protect an asset that holds its value against a declining currency.
At this time, the US Treasury yield to 10 years is about 2%, while inflation recorded by the CPI stood at 0.50%. That makes the real rate of return is 1.5%, a figure that causes assets like bonds more attractive than commodities.
For gold became a reality as a safe haven, inflation would have to exceed 2%
For gold became a reality as a safe haven, inflation would have to exceed 2% in order to generate a real rate of return of negative Treasury. If that were to happen, then we would see that gold will quickly appreciate as investors seek to protect an asset that holds its value against a declining currency.
The dollar and gold are two sides of the same coin. If one is strong, another is weak. Until we see a reversal of the dollar, gold is likely to continue with difficulty climbing. Falling oil prices also helps the metal to appreciate since low energy prices tend to go hand in hand with low growth expectations, bad environment for inflation is generated. Even if the global economy continues to decline, it is unlikely that gold acts as asset protection at this time. The dollar appears to remain strong, especially in its parity with oil. Once the crude, however, could be activated recovers signals gold recovery.
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