The price of gold has taken another tumble as equity markets steam ahead to new highs.
Gold is trading at $1372, down 1.5% this morning, after US equities reached all-time highs last night. Historically, when traders have been worried about the global economy or the strength of the stock market, they have tended to buy gold as a safe-haven asset – a phenomenon known as ‘flight to quality’. In recent months dealers have been willing to take on more risk, as global equity markets have hit pre-2007 levels and in some cases all-time highs. Investors have been taking their money out of safer assets like bonds and gold and putting it into stocks.
The recent upward trend in the stock market has been brought about by the expansionary monetary policies of various central banks around the world. The Reserve Bank of Australia (RBA) is the latest central bank to cut interest rates to an all-time low in an attempt to boost economic activity. For the time being there is no sign of the equity market rally coming to an end, and while stocks remain strong we might see gold drop lower.