4 Stocks With Rising Earnings Estimates As Gold Looks Dull

After a blockbuster start to the year, gold lost its luster plunging to one-year low thanks to a strengthening dollar and interest rate hikes. The yellow metal is down 10% from its January high, which confirms that the gold market has slipped into correction territory.

Below, we have discussed various factors that have influenced the price of the gold and will continue to do so:

Strong Dollar & Rate Hike

The U.S. dollar has enjoyed a strong rebound this year and is currently hovering near a one-year high. Meanwhile, the Fed has raised interest rates twice this year in quarter-point increments and is expected to implement two more lift-offs by the end of the year. Higher rates have diminished the yellow metal’s attractiveness since it does not pay interest like fixed-income assets. The trend is likely to continue this year given the latest Fed testimony, which reaffirmed its plans to gradually increase interest rates.

Powell painted an optimistic view of the economy, citing that America is expanding at a faster pace. Robust job gains, rise in income and optimism among households have lifted consumer spending in recent months and may continue doing so. Unemployment rate is below 4% and inflation is running above the Fed’s 2% target for the first time in several years.

Trade War Fears Failed to Entice

Gold is generally viewed as a safe haven in times of economic or political turmoil. But the bullion is currently struggling to garner safe-haven demand despite the ongoing trade war as investors see the dollar as a new safety investment in a strong economy. However, the escalation of trade dispute could trigger a global recession, raising the appeal for gold. Trump has indicated that he is willing to slap import tariffs on all $505 billion of Chinese goods. This is the latest update on the U.S.-China trade war after imposed tariffs of $34 billion on each other goods.

Also, trade conflicts could drive up inflation, leading to higher demand for gold as an inflation hedge.

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Carol D. Richards 2 years ago Member's comment

Most ideas ever. 190K... wow.