The price of gold increased yesterday, following massive selloffs on key worldwide stock markets. As Chinese manufacturing output slowed, it indicated that the country’s economic recovery may be faltering.
Yesterday, gold reached £1,290.14 per ounce (up 0.6%) and has continued to rise this morning, passing the £1,300 per ounce mark to reach a high of £1,302.46, a 4% rise for the past week.
China’s industrial production was up by an impressive 6.4%, which most countries would welcome, but the potential target was 7.8% growth following 8.3% growth in June. Now, because of this, Deutsche Bank now expects only 5.5% and 4.5% growth in the third and fourth quarters, respectively, significantly reduced forecasts.
Yesterday, the FTSE 100 fell 0.9% and Brent crude was down 1.6%. Also, FTSE began down 0.25% today, with Germany’s Dax falling 0.3%, France’s CAC falling 0.4%, Spain’s Ibex falling 0.6%, and Italy’s FTSE MIB falling 0.68%.
The chart referenced above from our website demonstrates a rise in gold from the previous week, being considered as a welcome turnaround.
Manufacturing activity in the United States has fallen from record highs in July to significantly lower in August. Industry confidence has slipped to 18.3 points, down from 43 in July, according to a recent New York Federal Reserve poll. This is still encouraging, as anything above zero is deemed a rise, but it’s still a significant dip and an obviously lower pace.
Geopolitics in the line of sight as Taliban regain Afghanistan
While many observers are concerned that the economic recovery is slowing, one long-term issue is Afghanistan and the influence that geopolitical unrest could have on the region. There are fears that now that the Taliban has regained control of the country, it may become a haven for terrorists. Numerous markets will keep a close watch on not only Afghanistan itself, but the response internationally to the new regime.
Gold has historically performed well during times of strife. If international terrorism is over the horizon in the future, gold demand will almost certainly surge as investors seek to preserve their wealth in the face of market uncertainty, disruptions to global trading and consumer confidence, amongst other issues of concern.