Gold just today (Thursday 5 September 2019) has reached the highest price ever recorded in the euro currency. To support this incredible – but on the other hand predictable – rise in the price of the yellow metal is the poor performance of various government bonds of world powers and the decrease in the GDP of the latter.
Global recession signs are advancing ominously
Physical gold is signing records on record in terms of performance. All this also thanks to the critical difficulties faced by the world economies. Eyes are focused primarily on the US with the differential between 10-year yields (1.52%) and two-year yields (1.47%) in clear decline. Still with regard to the United States, the trade war with China continues. The two powers are challenging each other with large increases in duties, to the detriment of the countless American and Chinese companies that have as their main business the export to one and the other country.
Germany is not faring any better, surprisingly for the first time it registered a negative return for the thirty-year Bunds. This is a news that portends a flaw in the German financial system that will now have much more difficulty in paying off its public debt. As if this were not enough, the German gross domestic product of the second quarter has recently registered a decrease of -0.1%.
Italy is not inferior. The Italian GDP on an annual basis also fell by -0.1%, so much so that Confcommercio said it was “worried” in view of a now very likely recession that would literally make the few investors left in the Peninsula escape. The country’s lack of solidity, even from a political point of view – with negotiations for the probable new government that have been going on for several weeks now – do nothing but throw fuel on the fire. A general instability that emits fear and perplexity.
Is it still the right time to buy the yellow metal?
The answer is absolutely yes. It should be noted that in US-Iran tensions and US rate cuts favor a new gold rush several months ago we predicted an increase in the price of gold of over $ 1,500 / ounce, an event that really happened.
For the next 6/12 months several analysts and business banks have reasonably assumed further increases by gold. Goldman Sachs predicts peaks of $ 1,600 / ounce from here shortly. The analysts of Union Bancaire Privée also take the same view, believing that the new failed global monetary policy programs can only make the gold jump higher and higher. In this case, UBP highlights the possible new US rate cuts by the FED. New cuts would consequently decrease real interest rates by the end of the current year. We should remember that the gold trend is linked to the trend in US rates. A scenario that sees even lower US real interest rates could further evaluate the bullion even considering the recent negative developments in the financial markets.
According to experts Mark Lacey and James Luke (Schroder Group) the end of 2019 will be extremely positive for both gold and silver, as well as for all other raw materials.
“Nothing has changed through the centuries. Who holds gold has power.” – Alessandro Morandotti