Another turbulent week is behind us, the only certainty is that this one won’t be any calmer. But gold, that sparkly commodity, which has stood the test of time, is proving (yet again), that it’s an investors best bet in a diversified portfolio. Let’s find out what’s going on and why gold is ever the staple, before giving you a rundown of the most volatile market events coming up this week.
Gold! Always believe in your soul
Gold boomed by 2% on Friday, following the US Federal Reserve Chair Jerome Powell’s speech, in which he appeared to be leaning toward a dovish monetary policy stance. Nice. Spot gold rose 2% to the lofty value of $1,528.53 an ounce which is the highest since August 13, when the shiny-stuff grooved its way to a six-year peak of $1,534.31.
So, why should you be interested in gold?
Do you know when Gold was first used as a commodity? No? Well it was way back in 800BC! That’s right. So, why has it always been coveted? Here are a few reasons:
● Familiarity ─ ever since 800BC, gold has been seen as a valuable material. This longevity confers familiarity. It creates a feeling of safety as a source of money that will always have value, no matter what.
● A lone ranger ─ Gold’s price doesn’t go up with other asset classes and it’s not as easily affected by global events (see above!). It doesn’t even have an inverse relationship, like stocks and bonds do with one other. It’s independent of other market movements.
● It’s running out ─ being a finite resource, gold’s value is, generally speaking, always going to go up. It’s the classic supply and demand paradigm. Gold doesn’t grow on trees, and, contrary to popular belief, it’s not found at the end of rainbows (we’ve tried). Gold is made when two neutron stars collide, and that ain’t going to happen again any time soon.
So, if you’re looking to diversify your investment portfolio in these turbulent times, you should get out your sifting pan. Failing that, you could invest in gold spot!
Things to watch out for this week
We get it, when it comes to fundamental analysis, it’s not always easy to sort the wheat from the chaff. Which events will cause maximum volatility and which ones will end up as deflated as a 3-week-old balloon? Here’s our roundup of the most volatile events this coming week.
● Today (Monday, 26th August), sees the release of the Non-defense Capital Goods Orders Excluding Aircraft. Let loose by the US Census Bureau, this little golden nugget measures the cost of orders received by manufacturers for capital goods, as those durable products often involve large investments, they are sensitive to the US economic situation and can be a good signifier of US economic health. Don’t miss it!
● Thursday, 29th August ─ again in the US, keep your eyes peeled for the Gross Domestic Product Annualised (Q2), which shows the monetary value of all goods, services and structures produced in the US during Q2. This helps show whether the US economy is growing or shrinking. There’s good potential for movement in USD markets here.
● Friday, 30th August ─ it’s the turn of the EU’s preliminary Consumer Price Index, a key inflation yardstick, measuring price movements by comparing the cost of a shopping basket of goods and services. Definitely not one to miss for EUR traders.
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The Contentworks Team