|Charlotte McLeod reports that at the end of 2015, most gold market watchers had one concern ... the U.S. Federal Reserve. Expectations that the central bank would raise interest rates were running high, and the general consensus was that an increase would not bode well for the yellow metal. A month and a half into 2016, it is clear that the situation did not play out the way many feared it would. While the Fed did raise interest rates midway through December, gold has not suffered as a result. In fact, on February 11 it blasted through the psychologically important $1,200-per-ounce level to hit $1,260, that left it up just over 16% since the rate hike.|
While gold has since retreated to trade closer to $1,200, many investors remain concerned about various aspects of the global economy, and are beginning to think of gold as a safe haven once again. In other words, investors have switched from being worried about gold performance in relation to the Fed to being worried about the world economy.
That is a situation that Josh Crumb, founder and chief investment officer of innovative fintech company BitGold, finds interesting. In his opinion, what market participants are really wondering is whether we are going to have another recession and credit crisis. Is it 2008 all over again because of oil prices and bankruptcies?
The prospect is certainly a worrying one, even for gold investors, after all, as Crumb pointed out, though 2008 brought plenty of economic turmoil, which tends to boost the gold price, the yellow metal still sold off during 2008. Luckily, for Crumb it is easy to see that today the world is much different from the 2008 world.
His confidence hinges on the idea that the core drivers are actually real interest rates and energy prices. Essentially, said Crumb, heading into 2008 high energy prices and low real interest rates drove gold higher before its crash. Now, however, energy prices are low and real interest rates have been on the rise.
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