Comm: Precious

(New York)

Gold has been doing well this year alongside all the market turmoil and uncertainty. While one could construe recent progress on a trade deal with China as potentially bad for gold—given its status as an uncertainty hedge—the reality is that rates are headed lower via Fed cuts. This means the Dollar will weaken, and in turn help gold. Societe Generale, for instance, is advising a maximum allocation to gold, saying investors should have 5% of their portfolios in it. Additionally, a resolution to the trade war would probably also weaken the Dollar as there would be less desire to take advantage of its safe haven status.


FINSUM: Basically Soc Gen is arguing that gold will benefit from both lower rates and a risk-on trade. The former aspect seems sound, but gold benefitting from less anxiety? Sounds a weak supposition to us.

(New York)

Societe Generale, famed European investment bank, has just told investors they should load up on gold. Gold is seeing several value drivers at the moment. These include the economic cycle and fears over the trade war, a lack of other safe haven assets, and importantly (and much less known), central bank purchases. Global central banks (like China’s) are trying to diverse away from the Dollar, and gold is an attractive way for them to do so.


FINSUM: There are a lot of tailwinds for the yellow metal right now. The Fed is less dovish than most expected and there does not seem to be much risk of a huge risk-on shift that would leave gold forgotten.

(New York)

Gold has had an extraordinary run over the last few months. It is the first time it has really broken out of its funk since just after the Crisis. However, both JP Morgan and Barclays are saying it is probably time to cash out. Both argue that gold’s recent rise has been driven by speculation and not real fundamentals, such as the direction of the Dollar and interest rates. As such, these prices look vulnerable.


FINSUM: This is good analysis, but we also have another reason for you—if the Fed cuts and investors switch to risk-on assets, where does that leave gold?

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