Gold is seen as a safe haven that moves inversely to risky assets such as stocks. So it’s no wonder it got a fillip as Donald Trump and Kim Jong-un hurled threats at each other last week. But there are other bullish factors underpinning gold, which could bolster the price even if tension on the Korean peninsula subsides.
One of them, as the Tempus column points out in The Times, is the traditional inverse correlation between gold and the dollar. The latter has slipped recently because the repeatedly trumpeted fiscal stimulus from the Trump administration has not been forthcoming, while the latest data imply a “fairly benign” inflation outlook. That makes higher interest rates, which would increase the yield on US assets, less likely, weakening the greenback and making gold’s lack of yield less of a problem.
Seasonal demand from Asia is on the rise too, and hedge funds, which are light on gold at present, are starting to nibble at it. Finally, demand from first-time buyers at one City dealer was up 76% last week, says Tempus, so it seems retail investors are getting interested too.