GOLD: Prices stay buoyant as GeoPolitical tensions heighten

The first half of 2019 proved quite eventful for the markets in general, not east the Gold [ag] market, at the same time stocks tracked their Q4 2018 pattern with losses by the end of April only to pullback again by 1 May then a few weeks later, stocks reached new highs yet again.

Central banks across the globe have signaled a more "accommodative stance" in an effort to bring global bond yields to record lows. As traders looked to balance higher stock prices with an increasingly uncertain GeoPolitical environment, gold prices have surged, making Gold one of the best performing market assets by the end of June.

The World Gold Council records global gold demand and supply growth in the second quarter of this year, as well as six-year inflow into gold-backed ETFs [Exchange Traded Funds]

Global monetary policy has shifted a full 180 degrees. Less than a year ago, both Federal Reserve (FED) board members and US investors expected interest rates to continue to increase, at the very least through 2019. By December, the most likely outcome was for the Fed to remain on hold. Now, the market expects the Fed to cut rates two or three times before the end of the year. And while statements by board members, including Chairman "Jay" Powell, are signalling a wait-and-see approach, the market has barely changed its forecast.

The Fed may not do what the market asks, but it generally doesn’t like to surprise it either. In recent history, the Fed adjusted its funds rate in line with expectations whenever the market’s implied probability of such outcome was 65% or higher; the only notable exception was rate cut announced during an un-scheduled Federal Open Market Committee (FOMC) meeting in January 2008 when the global financial crisis began to unfold.

The Fed is not alone. The European Central Bank’s (ECB) President Mario Draghi recently announced that they are ready to extend bond purchases or cut rates to sustain economic growth. The Bank of Japan (BOJ) is also expected to make policy more accommodative with emerging market
central banks likely to follow suit.