US President Joe Biden and his Russian counterpart Vladimir Putin have agreed in principle to hold a summit on Ukraine, French leader Emmanuel Macron said on Monday, offering a possible path out of one of Europe’s deepest crises. dangerous in decades. The possible meeting, whose date has not been confirmed by the Kremlin or the White House, eased the demand for gold, but also generated a rise in another rival as a haven, the US dollar, a factor that limited the losses for the precious metal. traded with the US currency.
“(Gold) is holding up well. The last time we went to these levels it ended up being a bull trap and the market fell very sharply. We’ve seen some good flows into ETFs, which is encouraging,” said Ross Norman, a independent analyst.
Among other precious metals, silver was down 0.8% at $23.77 an ounce, while platinum was up 0.6% at $1,073.72 an ounce; and palladium gained 1% to $2,367.93 an ounce.
Is it time to buy?
The price shows three consecutive weeks on the rise and this is not a trivial fact, since the main stock indices are now in a downtrend. In addition, countless stocks have suffered dramatic falls, of the order of 50%.
We are in a different context than months ago. The inflationary scourge in the US is intensifying and has reached 7.5% year-on-year, a record figure for the last 40 years. Meanwhile, the Fed’s benchmark rates remain close to 0%.
Why is this so important? Simply because gold has a very close relationship with real interest rates (which are nominal interest rates adjusted for inflation). When real rates rise, gold tends to fall. Conversely, when they go down, gold generally goes up.
We must closely monitor the evolution of the interest rate and what the Federal Reserve does or does not do. As we know, an increase in the interest rate would tend to improve the yields of US bonds. This would cause better incentives for investors to turn to said instrument and gold would be harmed. Why would this happen? Precisely because of the natural condition of gold, which does not accrue interest.
There are reasons to position yourself in gold, of course. However, it should be noted that the best time to buy gold is when prices are indicating it. And what have the prices told us in recent weeks? What to buy gold.
Source: Ambito
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