Not only are bullion traders cheering on gold, but several equities are getting great support from gold’s recent bull run — and oil’s doing its part.
As the precious metal continues to hover around six-year highs, investors are looking for all sorts of patterns to try and predict the next move.
According to Steven Miller at Grant Samuels Fund Management, investors are clearly looking for growth outside bonds other ‘safer’ investments and gold companies are profiting.
“It’s nice to have [gold] in periods of uncertainty,” he was quoted by the Australian Financial Review as saying.
But he said the wildcard was the oil price, which he noted was up on geopolitical tension and was adding support to gold.
“Surging oil prices could be a harbinger of an even sharper slowdown in economic growth. The oil price [rise] is a double-edged sword,” the strategist said.
“It might prompt a temporary surge in inflation but I think that the market would focus more on the potential for a slowdown in economic growth.”
He said a higher oil price would eventually flow through to consumers, who would then cut spending in other areas of the economy.
Gold and oil have previously enjoyed a fairly close relationship, but it’s not a perfect analogue.
Chart from MacroTrends.net — oil in orange
Meanwhile, gold companies themselves are getting a nice boost from the gold price.
For example, as the gold price hit fresh highs last week companies such as Northern Star Resources (ASX:NST) and Western Areas (ASX:WSA) shot up 16 percent and 20 percent respectively.
This content does not constitute financial product advice. You should consider obtaining independent advice before making any financial decisions.
Don’t miss a thing, subscribe now