Why own gold?
Comment of the Day

November 01 2017

Commentary by Eoin Treacy

Why own gold?

Eoin Treacy's view

This is a big question in an age increasingly dominated by the digitisation of just about everything and the assumption that cryptocurrencies are going to represent the future of financial transactions everywhere. However, one of the primary reasons for holding gold is because of the diversification it offers as a well-established, uncorrelated asset. 

Gold tends to perform best when investors lose faith in the value of their currencies or when inflation is outpacing the will/ability of central banks to raise interest rates. With speculation about the path of interest rates, who is likely to be the new head of the Fed, record low stock and bond market volatility, the uptick in terrorist attacks and geopolitical tensions there are reasons for at least considering the merits of an uncorrelated asset. 

Gold has been steadying above $1250 since early October but needs to sustain a move above $1300 to confirm a return to demand dominance beyond the short term.

Silver has been ranging in a volatile manner since hitting a medium-term peak near $20 in July 2016 but steadied from $16.50 in early October and posted an upward dynamic from that level again today; suggesting at least near-term support in this area. 

Platinum has confined to a lateral range between about $900 and $1000 since early this year and bounced today from near the lower boundary. A clear downward dynamic would now be required to question potential for additional higher to lateral ranging. 

Palladium remains the clear leader within the precious metals sector and is back testing the $1000 level. It has held a progression of higher reaction lows for more than a year and these would need to be broken to question medium-term scope for continued upside. 

The SPDR Gold Shares ETF (GLD) is back testing the region of the trend mean and at least steadied in that area today. Upside follow through would help to confirm more than temporary support in the $120 area. 

Back to top

You need to be logged in to comment.

New members registration