Recently, gold spot price hit its lowest point in 2018, and it’s still hovering on the low side. What does this mean? Well, first of all, it’s a great time to buy gold since prices are down. But it also signifies changes in the economic and geopolitical atmospheres.
According to a variety of data, the US economy has been improving over the last few years. Income is up, unemployment is down, and the Federal Reserve has felt confident enough in the economy to have raised interest rates several times. However, recent events have shaken this confidence.
One of the contributing factors to this shake-up is trade tensions, which have led to global uncertainty causing markets to watch the events between the US and China. Both countries have raised tariffs and some are concerned about the possibility of a full-blown trade war. The two countries make up the two largest economies in the world, and if tensions continue growing, it could have a ripple effect on many other countries.
Oftentimes, concern over the economy leads to a rise in precious metals spot prices, as investors flock to them as a safe haven asset. However, it appears as though investors are in more of a risk-averse mood lately. Some fear that rising import prices may directly correlate to greater inflation within the US. This is especially true when it comes to the rising costs of importing industrial metals like steel and aluminum, which could have a big impact on the automobile industry, construction industry, computer industry, and many others.
While we can’t predict exactly what will happen to the price of gold, some industry professionals believe that this price drop is a result of the collective initial reaction to trade tensions. It may prove that gold’s appeal as a hedge against inflation will reassert itself once the shock wears off.
What do you think about the current market and low gold prices? Let us know in the comments section below.