Since the gold price was recently close to the 20-month low, it has been up significantly since then. The windfall in the S & P500 is the main reason for tailwind. All the more gold fans should be watching the development of US equities.
The S & P500 has fallen close to the six-month low, and there has been panic in the market recently. Just since the beginning of the month, the index has fallen by 8.8 percent , which is the largest monthly loss in many years. In return, investors have shifted some money into gold, the gold price quoted at around $ 1,230 per ounce near the three-month high.
In the euro-based gold price , the index has risen to four-month highs after the euro slipped close to the 52-week low against the dollar .
On the one hand, rising US interest rates are pulling the dollar higher. On the other hand, the worsening economic data from the euro zone and fears of a strong debt increase in Italy push the euro down.
There are a lot of reasons for the price slump on the S & P500
A lot of factors caused the S & P500 to suddenly turn down sharply, causing the downtrend to continue over the next few months. So far, many investors believed that US companies could decouple from the slowdown in the global economy and that the current quarterly season would confirm that. However, exactly the opposite is the case. In turn, companies either deliver weak numbers or give profit warnings , causing stocks to collapse.
Take a look at the papers of semiconductor manufacturers Texas Instruments, or Advanced Micro Devices (AMD), or the world’s largest construction equipment manufacturer Caterpillar. Some companies point to weak demand, others, like Caterpillar, to rising raw material costs.
These are news investors do not like at all. The danger is great that the quarterly season will turn out to be much worse than many investors expect, after which the price decline is likely to persist for many individual stocks and thus for the S & P500.
US housing market sends strong warning signals to the overall economy
The second drag factor is that investors are starting to react more intensively to the increasingly weak data from the real estate market. Sales of new homes have fallen significantly more recently than expected.
The reason is that interest rates on mortgage loans have risen to seven-year highs . As a result, investors are worried that the sharp rise in interest rates over the next few quarters will put even more pressure on consumers and businesses, and that other sectors may be in trouble, such as the auto sector, especially as General Motors and Ford’s shares Year lows have collapsed.
Should the US economy cool off significantly in the coming quarters, or even slide into recession, then the stock market is likely to reflect this a few months earlier. Therefore, the recent slide should not surprise anyone.
I assume that with a continued slide in the stock market, some “experts” will soon say investors’ concerns about a possible recession are completely unfounded.
If you hear something like that, then all of your warning lights should come on. If the “experts” claim that the situation is under control and the problems “contained”, then the opposite is the case, then the hut is already burning brightly.
Gold fans should closely watch the development of the S & P500. I expect the US stock market correction to widen significantly. The next few months will show how the gold price will react to developments in the US stock market.