• The gold and the shares are getting closer.
  • The appetite for gold is boosted by the demand for safe havens despite the rise in stock prices.
  • Analysts believe that gold bulls still have the upper hand in 2019.

This week, the S & P 500 reached a new historical record after a positive job report. Yet the price of gold has reached unprecedented levels since 2013.

Gold, along with traditional safe havens such as bonds, has been rising steadily over the past two weeks, despite fears of a possible recession despite strong stock market performance.

The upward momentum of gold over a long recovery in the stock markets indicates that investors are not totally convinced that fundamental issues, including geopolitical risks, are solved.

Why gold rises on the bull market of S & P

According to Citigroup investment strategist Ken Peng, the excessive third-quarter sale on the stock market was caused by an exaggerated investor reaction.

Peng noted that investors feared a slowdown in global economic growth, Brexit and the trade war, exacerbating international geopolitical risks and leading to increased demand for safe havens.

He said:

"Investors were panicking about the trade war, global growth and Brexit in the summer and now realized the situation was not so bad. I would recommend that investors focus more on equities and high-yield bonds in the next three to six months. "

As a result, recent momentum in the S & P 500 and the rest of the US equity market has been largely attributed to capital outflow from the bond market as fears of a recession subsided.

price of gold
The price of gold has risen more than 7% over the past two months, despite the rebound of S & P. Chart: tradingview.com

However, the rise in the price of gold suggests that if investors are moving towards riskier investments, they are not overlooking the possibility of a sell-off in the markets.

Golden bulls have the advantage: the CEO of an investment company

Scott Bauer, CEO of Prosper Trading, has announced to Bloomberg, after a 7% increase in its price in just two months since August, that gold bulls have the upper hand in this market.

According to Bauer, the Fed's multiple rate hikes and the gradual weakening of the US dollar have created an ideal environment to push gold up.

He said:

"The Fed has just cut rates again and reported that unless inflation picks up, any likelihood of a rise in the interest rate is not to be feared. Bond yields have been kept within limits and the dollar has fallen relative to recent highs. The lower the interest rates, the more gold is gaining value and becoming the only true reservoir of wealth. "

With key markets in Asia such as China, Hong Kong, Japan, and South Korea struggling to recover from the third quarter's troubles, the price of gold could support its upward trend despite the the dynamics of the S & P index.

Last modification (UTC): November 2, 2019

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