Morning Commentary: Gold – A Store of Value during Uncertain Times

Foreign Exchange - Morning Commentary

Gold – A Store of Value during Uncertain Times

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Alan Rose
Alan Rose
Foreign Exchange Senior Trader
For the better part of the past week, markets continue to chew over the same ground over and over again. Looking a bit deeper into these range bound markets, price action continues to be largely uncorrelated and choppy with rapid price changes and changes in sentiment intraday and interday making it difficult for investors and traders to understand the underlying market dynamics.
Obviously, there is much uncertainty pertaining to U.S – China trade relations, Brexit, Fed policy, another potential U.S. government shutdown, etc. that are keeping many investors and traders on the sidelines in the short term. But behind the scenes, and going largely unnoticed, is one asset that has been steadily marching higher and that is gold.  Gold could bear watching as it and the U.S. dollar have an inverse relationship historically.
During the U.S. dollar crisis of 1980, gold climbed to nearly $600.00 from around $140.00 in 1975. During the Great Recession (correlation with the U.S. dollar was not as strong then), gold screamed higher from nearly $900.00 to a high of $1,921.00 mainly due to all the QE and concerns about future inflation. In today’s market, gold has been steadily marching higher since October of last year, rising by nearly 9% to near $1,309.00 as market uncertainty remains high.
While the history of gold and the U.S. dollar is long, the correlation is not always strong. But in light of all the global uncertainty and its future impact on the world and the U.S. economy, rising gold prices bears watching as it could be a harbinger of future U.S. dollar weakness. We will continue to keep you posted on this relationship.
  • U.S. home prices measured by the S & P Case-Shiller index came in below expectations again, rising by 5.19% nationally and below the 5.33% from last month. The 10-city index fell to a 4.3% increase which is down from the 4.7% increase the previous month. Home price gains have been slowing since last spring as higher mortgage rates combined with higher prices are finally beginning to bite and turn away prospective buyers. Las Vegas, Phoenix, and Seattle saw the sharpest gains from one year ago with Vegas home prices up by 12% and Phoenix by 8.1%.
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