Gold vs Wall Street: who will ultimately outsmart anyone?


Wall Street players continue to push the stock market to new highs, ignoring all fears of a trade war, a potential recession and numerous geopolitical threats, including Brexit.

When the stock market rises, gold tends to decline in price, as stocks are a risky asset and yellow precious metal is a hedging instrument.

In recent days, gold has lost a bit of its position, but is still holding close to the key mark of $1,500 per ounce.

Stock market bulls are focusing on the generally strong third quarter corporate reporting season and October US employment growth, as well as rumors that Washington and Beijing may soon enter into a partial trade deal.

Proponents of strong gold give their own arguments. They believe that until the risks of a trade war and geopolitical threats, including Brexit, are completely (or sufficiently) eliminated, investors will use precious metals as a hedging tool.

"Apparently, the markets have adapted to the ambiguous forecast of the Fed for 2020, because data dependence and constant fears of suppressed inflation retain the potential to soften the policy of the regulator. In this scenario, gold can still provide effective protection against a slowdown in economic growth, while a further reduction in rates (possibly already in the first half of 2020) will support risk sentiment in the short term, despite all the problems of the global economy," TD Securities representatives noted.

Along with statements that there are many reasons that should restrain the current stock market rally, one can hear opinions about the lack of support factors for gold that could prevent it from falling to $1,400 or even lower.

Specialists at TD Securities believe that the skeptics' predicted sale of gold due to positioning may turn out to be more modest than might be expected.

According to experts, it is still unknown how strongly trade optimism will support Wall Street and risky assets in general.

Time after time, gold finds support below the psychologically important mark of $1,500 per ounce, even despite overbought and reduced tensions in trade relations between the United States and China.

In the first half of the year, the precious metal went up by 20%. Usually, such a strong growth is followed by a correction that allows you to "cool" the mood. However, the peak that we have so far seen as part of the correction for gold is a decrease of $100 from a local peak and two months of "talk" in the range of $1,560-1,460 with a gradual narrowing of it. It is quite possible that this talk in the range will continue until December.

The material has been provided by InstaForex Company -