Markets Rekindle Love Affair With Gold

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Markets Rekindle Love Affair With Gold

One could be forgiven for assuming that the recent Ukrainian tensions have dissipated somewhat. Reporting of the crises has dropped down the running order as its status has changed from a tense standoff to that of yet another simmering geopolitical situation.

The markets appear to see this otherwise. When the Russian army concluded its maneuvers on the Ukrainian border two weeks ago there was an immediate selloff in the safe haven asset classes. Tensions in the region however have gradually risen again, albeit at an almost unnoticeable pace. So too has the demand for safe have assets.

Gold today is at the highest level it has seen in over 6 months. At one point in London this morning spot Gold hit a high of just above $1,375/Oz. Adding validity to this price rise is the side note that volumes are exceptionally high, over 50% more Gold has traded this morning than would be expected on a normal trading day.

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Yesterday’s White House meeting between US President Obama and acting Ukrainian Prime Minister Yatsenyuk has been seen to greatly increase the US’s role in this conflict. This is rapidly turning into the greatest US / Russian standoff since the Cold War.

Added to this mix is the troubling slowdown in the Chinese economy. This in it’s own right would cause investors to reconsider where they place their money. Looking down the road however it can be seen that the continued slowing of Chinese expansion contains imminent trouble for emerging markets as a whole.

Developed economies are steadily, if slowly recovering. It’s the non-mainstream portions of investment portfolios that are currently looking for a home. Riskier assets are out of favor for now so it is back to the safe havens to store value, at least until the present geopolitical and emerging market situations subside.

Gold has a long road back to the dizzy peaks of 2011. It also has come a long way from the lows of late last year. It looks however that great Gold selloff of 2013 was premature, this precious metal is certainly back in favor in 2014 as investors rate wealth preservation above wealth accumulation.

To contact the reporter of this story: James Brennan at james@forexminute.com