By the end of the week, a resounding sell-off on the US stock market helped gold to shine again. Some analysts believe that a further stock collapse could be a key growth trigger for bullion.
Following the results of yesterday's trading, gold futures showed the best daily gain in a month. They rose 1.4%, or $25.30, to $1,841.
Silver also showed excellent dynamics on Thursday. The asset rose by 1.7% to $21,908.
Precious metals have received long-awaited support from risk aversion. Investors are concerned about the economic downturn in the US and a possible recession.
The military conflict in Ukraine and the maintenance of quarantines in China continue to undermine global trade and increase inflationary pressures around the world, including America.
Now the markets are afraid that the incessant rise in prices in the United States can significantly reduce the margins of large American retail chains.
Against this background, the US stock exchanges closed down again yesterday. The Dow Jones index plunged by 0.75%, and the S&P 500 – by 0.58%.
Recall that a day earlier, the S&P 500 recorded its worst result since June 2020. On Wednesday, it collapsed by 4%.
Gold usually rises in value when stocks sell off. However, recently the asset has not benefited from anti-risk sentiment, because traders preferred a protective dollar to bullion.
Nevertheless, it cannot be said that the yellow asset has finally lost its status as a safe haven asset. Since the beginning of the year, the dynamics of gold has hardly changed, while the S&P 500 index has declined by 18% during this time.
The main pressure on the precious metal this year was exerted by the tightening of the Federal Reserve's monetary rate, which caused a rally in the dollar and the yield of US government bonds.
Now the US central bank plans to aggressively raise interest rates during the summer. However, analysts believe that the gold market has already taken this factor into account, so there should not be a significant drop in quotes in the coming months.
On the contrary, many experts see significant potential for bullion growth in the foreseeable future. The yellow metal may receive significant support from the strong volatility of the US stock market.
According to the forecasts of research company Capital Economics, this year the S&P 500 index risks reaching the bottom at about 3,750 points.
Demand for stocks will fall due to increasing inflationary pressures. In the coming months, price increases may become even more problematic, which will force the Fed to raise interest rates faster.
Too sharp an increase in rates is a direct threat to the American economy. And, as you know, in conditions of increased risk of recession, there is a growing need to diversify portfolios with the help of protective assets.
Of course, it is still too early to speculate about the possibility of gold reaching $2,000. First, the precious metal must finally break the bearish trend.
And the first positive signal is already there. This week, the quotes finally managed to overcome the critical resistance at $1,830.
