As geopolitical concerns increase around the globe, it’s only a matter of time before gold is sent soaring to new heights.
CNN Money’s Paul R. La Monica believes we’re at the cusp of the next gold rush, and it’s geopolitical concerns from around the globe that are going to be its primary drivers.
All eyes have been on Britain as it deals with the aftermath of yet another terrorist attack, the third in a short span of time. The country’s politics are likewise in turmoil, with Prime Minister Theresa May taking a dive in the ongoing election and a Brexit vote that has yet to be put in motion.
Over in the Middle East, Qatar is feuding with a number of states in the region, including Saudi Arabia and Egypt, which have cut diplomatic ties after accusing it of sponsoring terrorism. The issues are significant enough that Ding Yao, an analyst with ThinkMarkets in London, said in a report that “the conflict between Saudi Arabia and Qatar could change the shape of the Middle East” and push gold, which is already trading just shy of $1,300, to $1,350 an ounce.
The Trump administration is also currently facing difficulties after former FBI director James Comey’s testimony before Congress last Thursday – some worry that Comey’s testimony will be damaging to the President, possibly to the point of impeachment.
Despite the performance of the U.S. stock market, there are signs that investors are beginning to worry about an impending correction. These fears are aggravated by a sinking dollar and weakening long-term Treasury bond yields, and the latest jobs report did little to instill confidence. “Investors are hedging their bets to some degree. There are some potential negative surprises lurking,” said Lisa Kopp, head of traditional investments at U.S. Bank’s Private Client Reserve.
One of these negative surprises could be the ramifications of growing consumer debt, which has already passed 2008 levels and shows no signs of stopping. These issues put the health of the U.S. economy moving forward into question, which in turn places a lot of strain on Trump’s administration and its optimistic growth projections.
All of these factors are expected to benefit gold, which shines in times of geopolitical turmoil and economic difficulties. Analysts at research firm Incrementum agree, stating that worries about the U.S. economy and “the election of probably the most unpredictable U.S. president of all time” will push the yellow metal to new heights.
“The rally in the precious metals sector has probably only just begun,” said the Incrementum analysts of the metal, which is up 13% so far this year.