Gold price rises: Stock Inflation and the Gold Bubble

The price of Gold continues to rise. After the precious metal was de facto comatose at the $1,775 mark from last Thursday to yesterday noon, it continued to climb to a peak of $1,787 last night. Even though the Gold price has currently come back to $ 1,782. Recently, Gold helped that the US Dollar weakened a little since yesterday morning. The following chart in the larger picture (since the end of May) shows how Gold is ultimately rising steadily. Even if there are always small dips, the price is still rising steadily. From a technical perspective, some analysts are targeting the next big round mark of $1,800.

Dieser Chart zeigt den Goldpreis-Verlauf seit Ende Mai

Gold price rises

In the Gold price we currently see the highest level since the year 2012 and it is interesting to note that in the overall view of the corona crash on the stock market the risk off trade has worked its way into Gold (see here). The bottom line is that stocks have been in the red since February. On balance, the Gold price was able to make good gains. Investors are fleeing to the safe haven of Gold when there is uncertainty, and when they are more willing to take risks, they buy stocks again. For weeks and months, Gold has been helping that the central banks print more and more money. States are getting more and more into debt and interest rates are falling more and more. Therefore Gold is basically becoming more and more attractive!

But lately something strange has been happening. Let’s look at the following chart, where the Gold price is compared to the Dow Jones on CFD basis over the last ten days. Overall, the prices are running parallel. This may have something to do with a kind of “inflation” that is reflected in rising stock prices, which in turn is causing many investors to invest in security. More on this in an analyst commentary in this article. The price of Gold seems to be pushing itself up bit by bit. Can it apparently go up with rising stocks at the moment? On the other hand, since this morning we are seeing a slight decline in the Gold price, exactly parallel to the decline in the stock markets since this morning.

Chart zeigt Gold gegen Aktien seit zehn Tagen

Analyst Opinions

Avatrade’s Naeem Aslam mentions today that the Gold price has just reached an 8-year high and that the precious metal price is approaching its target of $1,800. There is no doubt that traders are pumping money into Gold ETFs as demand for Gold has increased due to corona virus concerns. Falling interest rates around the globe and the weaker Dollar would keep the rally in the Gold price alive. There is speculation that Gold – once again – could become the world’s reserve currency given the amount of debt the US has accumulated. In fact, the US debt situation is unlikely to improve in the foreseeable future. The money supply is likely to continue to rise and this will only add to the lustre of Gold. In addition, there are many investors who are still counting on an unstable economic recovery due to Covid-19, said Naeem Aslam.

Ipek Ozkardeskaya of Swissquote mentions this morning that the Gold price is testing the $1,790 mark and slowly but surely moving towards the $1,800 mark. He said that investors are keeping a close eye on the precious metal, as they are not convinced by the actual risk rally and lower government yields. At this point, it was observed that stock price inflation was also leading to a Gold Bubble. If stock markets continue to bloat, there is little reason for Gold to do the opposite, says Ipek Ozkardeskaya. So, is a possible further rise in the price of Gold a hedge for the stock market, in case it suddenly crashes?

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