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Commodities: Spot gold and the global economy

Gold prices are on the rise as regional tensions in the Persian Gulf reached the highest point. The U.S. president Donald Trump ordered the military operation before canceling it when the warplanes were already in the air. All these illustrate that tensions between the U.S. and Iran are running high. Incidents like this one have a direct impact on the global economy. Gold prices, meanwhile, are rising because investing in this precious metal is one of the best solutions when other sectors struggle to cope with the current reality.

The gold prices are on the rise this year, let’s have a look at the statistics. In June gold prices rose by 8.73% which is the excellent result. It is important to remember that the gold price is on pace for the best monthly as well as quarterly performances since 2016. According to the Goldman Sachs predictions prices will continue to rise. In the next three months, it will reach $1450 instead of the previous forecast of $1350. In sixth months it will reach $1475, and in one year the price of one ounce of gold will be around the same amount of money.

The Trade war and the gold pricesSpot price of gold is a useful tool to measure the extent of the trade war and other ongoing issues in the economy

The trade war between the U.S. and China is escalating as Trump’s position is that either China will meet the conditions set by the U.S. or he won’t agree to any other agreement. His viewpoint makes the situation even more unstable as his statement might decrease the chance to find the solution which is acceptable for both sides.

The G-20 summit in Osaka, Japan is scheduled for the June 28-29. The meeting between Donald Trump and Chinese president Xi Jinping will shape the future development of the global economy. The leaders of the countries will discuss the many topics. However, most likely the trade war will be a major issue, and the outcome of this meeting will affect the gold, oil, and other commodities.

The global economy is slowing down. According to the World Bank, the annual global economic growth rate is 2.6% for 2019. The previous year it was higher, and for the next year this number is 2.7%, and the problem is not only the global economy and its development. China’s economy is slowing down, and it means that the second biggest economy is experiencing economic difficulties. Huawei had the plan to become the world’s biggest smartphone producer. Instead of accomplishing this plan tech giant is trying to preserve the market share. The revenues will drop by $30 billion during the next two years. The company’s overseas smartphone shipment will decrease by 40%, which is a significant blow to the Huawei and the Chinese economy in general.

All of the arguments mentioned above brings us to gold prices. Gold is a stabilizing factor in an otherwise unstable economy. Investors from around the world, along with the central banks, are working to increase their gold reserves. The week after the G-20 summit will give us more insight about future gold prices.

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