Is gold loosing its safe haven status?
Published on 27.06.2018 19:50

Gold maybe losing its status as a safe haven asset according to some analysts after failing to capitalize on recent events happening around the world

The trade war brewing between the US and China which also involves Canada and Europe has caused world stock markets to tumble with the Dow Jones index falling over 1 percent already this week.

In earlier times when the stockmarket fell investors would park their money in gold due to the uncertainty but this time around the precious metal is being shunned.

 “The fact that gold has tumbled to a fresh 2018 low this morning despite global trade tensions weighing on sentiment, continues to beg the question if the precious metal has lost its safe-haven appeal,” noted Lukman Otunuga a research analyst at FXTM

Mr Otunuga also noted that the anticipation of higher interest rates in the US is also putting pressure on gold as investors seek out the US dollar to enhance their returns.

Gold is only sought out for capital gains and is not an interest-bearing asset.

“Price action suggests that a stronger dollar and expectation of higher U.S. interest rates [remaining] gold’s biggest nemesis,” Mr Otunuga added.

The material published in on this page is produced by the FIBO group companies, and should not be considered as the provision of investment advice for the purposes of Directive 2004/39/EC; furthermore it has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is not subject to any prohibition on dealing ahead of the dissemination of investment research.

Andrew Masters

Analyst

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