Economic Volatility Boosts Those Who Trade Gold

Gold has long been seen as a safe-haven, a place for investors to put their money in times of economic uncertainty and volatility. 

The year 2016 appears very much to be one of those times…with both prices and demand for gold rising since the start of the year. The recent economic news of US growth figures and Great Britain’s vote to leave the European Union has been viewed as negative. Consequently, these events actually bode well for those who trade gold.

Gold saw its sharpest quarterly rise in more than 30 years during the first three months of 2016. Demand for the precious metal also climbed at a historically record-high rate during the first quarter. This all happened as oil prices plummeted and investors fretted over China’s slowing growth and currency devaluation. Bankers, especially, started off the year by buying up gold.

“Spurred on by the uncertainty raised by negative interest rates the investment sector was the dominant driver of gold demand, helping to push prices up 17 percent over the course of the quarter,” according to Alistair Hewitt, head of market intelligence at the World Gold Council.

Already solid, gold surged again in June as Great Britain voted to leave the European Union, throwing global stock and currency markets into a tailspin on worries of disruption to the business environment and slower economic growth. As summer nears to a close, that environment of fear is still giving a boost to those who trade gold. 

The latest boost to the precious metal came in early August when US economic growth data for the second quarter came in at 1.2%, well below analysts’ expectations.  The momentum is expected to continue, according to analysts.  With the world’s major central banks unlikely to raise interest rates anytime soon, and the continuing market uncertainty and chaos following the Brexit vote, times appear good for those who trade gold.

“Looking ahead we anticipate that ongoing market uncertainty and unconventional monetary policies will continue to support both investment and central bank demand,” Hewitt said in a recent Financial Times article.