Major risks in 2018 could keep the shine on gold

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Major Risks Could Keep the Shine on Gold
  • Closing above $1,300 an ounce for the first time in nearly a month, gold looks constructive as we head into the fourth quarter and beyond. Not only was the metal trading above its 50-day moving average again, but for all of 2017, it was following a nice upward trend as the U.S. dollar dipped further.
  • Since Inauguration Day, the greenback has lost more than 8 percent of its value as of October 13. This is reflective of a more dovish tone from the Federal Reserve as well as concerns that the Trump administration’s fiscal agenda—including health care and tax reform—could fall short of expectations. Because it’s priced in U.S. dollars, gold has historically benefited when the dollar falls.
  • In its latest analysis, BCA writes that major risks in 2018—inflationary expectations stemming from President Trump’s protectionism, tensions between the U.S. and China, and continued strife in the Middle East among them—could keep the shine on gold. The research firm reminds investors that gold has historically done well in times of economic and geopolitical crisis, outperforming the S&P 500 Index, U.S. dollar and 10-year Treasury by wide margins, the last two of which are backed by the full faith and credit of the U.S. government. Because the metal is negatively correlated to other assets, it could potentially serve as a good store of value if equities were to enter a bear market.

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