(**promotion blocked** News) - Once again, the gold market never fails to impress, as we see another relatively short and shallow correction.
Although gold remains well below last month’s all-time high of $3,500 an ounce, it has recovered all of last week’s losses and is set to end Friday back above $3,300 an ounce. Gold prices are closing the week with another 3% gain.
However, what has really caught my attention is the volatility in the gold market. This week, gold moved within a 6% range from its low to high. Last week, the price action swung in a nearly 5% range, and the week before that saw a nearly 10% range.
Over the past 25 years, gold’s average daily price volatility has hovered between 1% and 2%. So far this year, average daily volatility stands at 2.3%. Higher volatility does make trading gold more difficult; however, its long-term potential remains firmly intact as geopolitical uncertainty, global debt levels, and rising inflation risks continue to dominate investor sentiment.
According to many analysts, investors should expect to see further volatility in gold next week as the U.S. and Chinese governments meet over the weekend to discuss global trade. However, we still don’t have answers to two important questions: How much damage has been done to the global economy? And how long will it take to heal?
Until we get some clarity on these two questions, gold will remain an important safe-haven asset. According to research from FTSE Russell, the traditional 60/40 portfolio is no longer relevant, and investors should have 20% exposure to gold.
“[Gold] is no longer merely a defensive store of value, but a dynamic, strategic tool for navigating complexity in the multi-asset space,” the analysts said in the report.
The data continues to show that investors are paying significantly more attention to gold as demand keeps rising. What’s interesting is that even after two years of dominating the marketplace, Asian investor demand remains insatiable. According to the World Gold Council, Asian investors bought 69.6 tonnes—valued at $7.31 billion—in gold-backed exchange-traded funds (ETFs) last month. In comparison, North America-listed ETFs saw inflows of 44.2 tonnes, valued at $1.83 billion.
With this kind of demand, it’s not surprising that a growing number of banks are talking about $4,000 gold. So far, Bank of America has been the most aggressive, saying the precious metal could hit that price target by the end of this year.
That’s it for this week. Have a great weekend, and happy Mother’s Day!
Gold is flashy, bold, and unstoppable
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Neils Christensen
Neils Christensen has a diploma in journalism from Lethbridge College and has more than a decade of reporting experience working for news organizations throughout Canada. His
