Why does gold rise in price on the stock exchange?
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The price of gold again reached a historical high, rising above $2.4 thousand per troy ounce. This is evidenced by data from the Comex exchange. Over the past year, prices have increased by almost 20%. Many analysts attribute this trend to geopolitical tensions in the Middle East. According to The Wall Street Journal, Iran intends to retaliate against Israel in the next two days. The second reason is the expectation of a weakening of monetary policy by the US Federal Reserve.
Now many investors are looking for an alternative to traditional instruments, noted Evgeniy Nadorshin, chief economist at PF-Capital: “Gold was, of course, a reserve metal. For old times’ sake, they also run there. And, in addition to this, we have access to the dollar. It has become more expensive, including on the Russian market; over the past few days the ruble has been depreciating. Investors are trying to take something, in particular, the same cryptocurrency.
The conflict between Iran and Israel is now provoking attention to this, since the movement is much larger than energy markets. It provokes investors who fear a global crisis. The United States is making it clear that if the confrontation escalates into a direct clash, it will try to take Israel’s side.”
Nearly $16 billion flowed out of large U.S. banks from April 3 to April 10, and large company stocks experienced their biggest weekly outflows since December 2022, according to a Bank of America survey. In the coming months, we should expect an increase in oil prices, says economist and managing director of Trade123 Vladimir Rozhankovsky. At the same time, according to him, the stock market will be more heterogeneous:
“Investors and markets are tense every day from this situation, from the fact that it is dragging on, and that it cannot be stopped in any way. Accordingly, everyone is waiting for an increase in oil prices.
This is happening even despite the fact that the United States is exporting these raw materials at an accelerated pace, that is, this has already been won back by the market. Now the market is looking at where there may be additional oil reserves that could be released and which would contribute, as in 2023, to a relatively low level of fuel prices. But, in my opinion, they have either already been exhausted or will be exhausted in the next couple of months. Oil traders understand everything perfectly; 3-4 month futures show their appetite for bullish trading.
In the stock market, most sectors will be under pressure. Those that depend on cheap money will feel very bad in the coming months. Those that produce real assets, primarily raw materials, metallurgy, oil, and precious metals, were chronically undervalued in previous cycles. In my opinion, now they are finally getting a second wind. It makes no sense to invest in the broad market; in my opinion, it is necessary to invest in anti-inflationary sectors and reduce assets in high-tech ones.”
On April 12, at the moment, Brent quotes grew by more than 1%. Shares of oil and gas companies from the S&P 500 index have risen in price by 16% since the beginning of the year, outperforming shares of technology companies, which rose by 11%, Bloomberg notes.
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