The jittery state of markets is in evidence again today after a few days of gains has been met with a down day.
The catalyst for today’s negativity is renewed concerns about global economic growth prospects as central banks tighten their monetary policies.
This narrative hasn’t materially changed over the last few months with runaway inflation and enduring worry with central banks, notably the Federal Reserve and the Bank of England, implementing a series of interest rate hikes to try and bring surging consumer prices under control.
Live Gold Price – $/oz
What is interesting to note is that gold hasn’t found itself immune to declines on days when equities are falling. So far today gold is down a fraction and is trading under $1,820 an ounce, towards the lower end of its recent range. While gold’s drop is much less than global equities are suffering today, with some European indices showing losses of 1%, the precious metal is not proving the safe haven asset of choice currently.
This unusual correlation between moves on the stock market and on gold is a reflection of the main measure that central banks are using to tackle inflation, hiking interest rates and reducing stimulus, is a drag for both growth stocks, which make up a large share of US indices in particular, and gold.
For growth stocks the reduction of the availability of cheap money places a focus on a company’s ability to turn a profit today rather than in the future while for gold, its lack of yield makes the asset less attractive when investors can achieve increasingly higher returns on assets that track benchmark interest rates such as bonds.
Carlo Alberto De Casa is an external Market Analyst for Kinesis Money, responsible for updating the community with insights and analysis on the gold and silver markets. Carlo provides regular commentary for UK notable outlets including the BBC, Telegraph, The Independent, Bloomberg, FX Empire and Reuters.
With a credential background in Economic Finance and International Exchange (MA), his critical analysis on gold and silver’s markets performance is frequently quoted by leading publications, week-on-week.
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