As Gold Price Holds at $1,300, Scientists Witness the Origins of the Precious Metal

Wednesday, October 18, 2017

gold bar and nuggetts

The gold price this morning saw the yellow metal holding above $1,300 before dipping a bit below. Given the strength of the Dow Jones Industrial Average as of late—as it’s been breaking its own records—this level of success for what is widely considered a “hedge” investment is worth noting. But simply because gold has held on to the approximate level of $1,300 for the moment doesn’t mean that the precious metal will continue to hold.

Looking at the Past: Gold in the Cosmos

Perhaps the most interesting headlines made by gold in the recent weeks was not due to economic factors, but cosmological curiosities. A recent crash of neutron stars made headlines as the first recorded event of its type. It’s called a “kilonova,” a sort of rare version of a supernova.

On the surface, this story has absolutely nothing to do with precious metals here on earth. But in studying the gamma rays and light spectrum emitted by this type of explosion, scientists have been able to trace the existence of heavy metals—including gold—to the death of stars. It’s a scientific reminder of the rarity of elements of gold across the universe, especially when compared to other elements.

What Gold Futures Are Saying

Now we go from the extreme ancient past of gold to the short-term future. Or, more accurately—“futures.” MarketWatch noted that gold saw a steep dip in futures trading as of late thanks to a “pickup of inflation in the United Kingdom,” which in turn put downward pressure on the price of gold. Why would that push gold down when the metal is seen as a hedge? Because some believe that a rise in inflation could lead to harsher interest rates, which in turn will put downward pressure on prices.

If you find that confusing, you’re not alone. People in the stock market have been wondering what to do with the ever-increasing prices of stocks, especially with a pessimistic outlook from those such as Morgan Stanley. They see even a well-balanced portfolio returning only something in the range of 4-5% annually over the next ten years, which is well below targets for even conservative investment strategies.

Where Will Gold End Up?

Though the recent revelations about a recorded kilanova put gold back in the headlines, gold investors would like to see gold’s price making headlines soon. And if the predictions by Morgan Stanley for the stock market are true, then investors will likely look for other ways to make better returns. Typically, gold does not offer these returns. But it does offer a hedge from uncertainty—and Morgan Stanley’s uncertainty about the next 10 years in the stock market is worth noting.

The Dow Jones is now well over $23,000, a point that was almost unthinkable only years ago. But that won’t necessarily last. What investors know does last is a metal that’s been around since stars have been exploding—the only question is whether or not that value will serve as a hedge for the rest of 2017.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.