Gold's appeal grows as uncertainty about the future increases

August 30, 2021 15:00

As we mentioned in our analysis last July with respect to the evolution of gold, during the first half of the year gold lost 7% mainly due to the strength of the dollar and the good performance of the main stock indices during the first half of the year, although it seems that during the months of July and August this trend is reversing since in the last two months the price of gold has revalued by 2.68%.

This can be explained by the growing uncertainty in the financial markets around the future of the economy due to the deterioration that we have been observing gradually both in Germany and in the United States after the strong irruption of the Delta variant of the coronavirus since the existing vaccines are not having a good behavior before this new strain thus lowering the effectiveness of the same generating a growing bewilderment around the vaccination process.

In addition, in our analysis last week, the intelligence company Palantir has announced the acquisition of $50.7 million in gold bars as part of its risk diversification strategy in the face of a possible "Black Swan" event in the stock markets thus showing its doubts for the future.

As we mentioned in previous analyses, the reality is that if we add to the deterioration of the economy that we have commented on the geopolitical changes that suppose, for example, the exit from Afghanistan and the possible future conflicts, the struggle for world hegemony between the United States and China or the uncertainty and volatility that can be generated in the financial markets in the face of the economic measures that can be taken by organisations such as the Federal Reserve or the European Central Bank to fight inflation such as the rise in interest rates and the progressive reduction of their respective balance sheets after the large amount of asset purchases that have occurred during the last years, it is not surprising that more and more people doubt the capacity of these bodies and FIAT currencies, looking for alternatives in which gold can focus all the attractiveness of investors.

Technically speaking, if we look at the daily chart, we can see that after the last strong falls at the beginning of August in which the price again tested its main support level represented by the lower red stripe, the price has experienced a strong upward momentum that has led it to exceed its important average of 200 sessions in the red to the upside.

This impulse is leading the price to look for its first resistance level represented by the lower green strip, so we must be very attentive to the behavior of the price at this level, since a possible bullish break would open the doors to look for the $1,900 per ounce in search of its next resistance level.

At the moment, the price is still far from the highs of last year, but if the uncertainty continues to grow, gold could have good prospects for the future due to its character as a safe haven asset.

Source: Admiral Markets MetaTrader 5. Gold daily chart. Data range: April 29, 2020 August 30, 2021. Prepared on August 30, 2021 at 12:30 p.m. CEST. Please note that past performance does not guarantee future returns.

 

Evolution in the last 5 years:

  • 2020: 21.86%
  • 2019: 15.45%
  • 2018: -3.22%
  • 2017: 12.75%
  • 2016: 10.12%

 

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Roberto Rojas
Roberto Rojas Financial Analyst, Admirals Spain

Roberto is a Financial Analyst with a European Financial Advisor certificate and a Double Degree in Business Administration and in Actuarial and Financial Sciences. In 2013 was graduated as an Expert Manager in Equities