For the first time this year, gold has broken the strong resistance at $1300 and the precious metal is now standing around 1317$, its highest level since 2016. The summer was quiet but volatility is back due to the escalating tensions between the US and North Korea. We also believe that those tensions are not the only reasons for the gold surge. Economic reasons are also important. The US S&P 500 index went from 2480 to 2440 and it seems that investors become more reluctant to buy stocks at those elevated prices.
On top of that, we consider that the Fed made a clear U-turn by raising rates twice this year before stating that it was almost done with rate hikes. The US central bank went from hawkish to dovish. We recall that the Fed was expected to raise rates at least 3-4 times this year. Markets are now ruling out a rate hike before year-end.
By Yann Quelenn