Gold Shines Despite Strong Equities and USD

Gold has really been shining this year, with prices rising Thursday to a seven-year high as the precious metal continues to push above the $1,600 level. The recent gains for gold come on the back of safe-haven demand, with the worries over the coronavirus helping to spur gains for haven gold.

Those gains are coming even though U.S. equity markets continue pushing to new record highs, and the U.S. dollar is showing broad-based strength against global rivals. Both of these are typically bearish for gold, but not this time as the haven demand for gold has trumped the usual counterindications.

One other factor that’s helping gold right now is the low-interest rates all across the globe. Historically gold performs best in low-interest-rate environments since it has no yield of its own.

Canaccord Genuity analyst Martin Roberge has pointed out that the Toronto Stock Exchange Global Gold Index (TTGD) topped its August 2019 high on Wednesday, and is nearing the 2016 high of CAD$279 as it closed Thursday at CAD$274.27.

That’s important because a break above that level could remove any near term resistance for gold, leading to the second leg of its bull run. Historically when gold enters the second phase of a bull run it returns an average of 159% through the peak of that second phase.

Once gold breaks above the 2016 TTGD level it should take aim for its 2011 high, which is 84% above current prices. Gold is also showing as fairly valued currently, giving it plenty of headroom to run higher.


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