A breakthrough in Brexit talks last week has helped strengthen the Pound Sterling and the Euro against the US Dollar. The Pound is currently worth $1.30 – the highest value since May 13, while the Euro is at $1.11 – its best performance since August 25.
Gold might have calmed down a little of late but still made an 8% gain in August alone, and in USD terms gold is up $216.93 (17.01%) in the past six months of trading. The main driving factor continues to be the US/China trade war, but a weaker Dollar could bump gold back over $1,500 per ounce and perhaps even higher.
Despite being a reliable safe-haven asset and a rare precious metal, gold doesn’t always attract heavy investor attention. The past 12 months have been a strong run for the gold market, but as James Steel (Chief Precious Metals Analyst at HSBC) told CNBC: “Gold needs a diet of intrigue or bad news to keep going up”.
A weaker US Dollar is something that President Donald Trump is keen on, despite his early presidency claims otherwise. To the public, a strong Dollar sounds good. To the businessman, a strong Dollar means more expensive exports, which deters buyers. It also means more expensive debt and repayments.
Nordea – the Nordic financial services group – argues that the US Dollar won’t weaken anytime soon because the United States is outperforming the rest of the world; even if the global economy and their own is steadily declining. In terms of the G7, America’s GDP, inflation, and base interest rates are the highest.
Even if the Dollar does hold on or even recoup its losses, other experts believe that geopolitical and economic uncertainty in the world present major risk factors for the global stock markets – in particular the US exchanges which seem to be setting new all-time records every week. Investor caution against these market risks has already led to a surge in demand for safe haven assets. Gold is one of these, and the London Bullion Market Association recently predicted a price of $1,658 per ounce by this time next year in the conclusion to its annual Precious Metals Conference in Shenzhen, China.