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Research Market strategy
by Swissquote Analysts
Live Analysis

Gold edging higher as geopolitical tensions and worrying economic outlook push investors into haven assets

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US – China trade talks are facing a deadlock, Brexit talks are not expected to find a common arrangement by now, tensions between the US and Saudi Arabia relating to the Khashoggi affair are mounting and finally US President calls the Fed his “biggest threat”. All these reasons tend to favor a rise in the golden metal, which appears to have a favorable outlook from this year-end to the next.

Indeed, as last week market selloff erupted, pushing US, European and Asian markets lower, gold was able to benefit from the trend, gaining 2% in the last two weeks. Large US indices lost along 4% while European and Asian indexes Euro Stoxx 50 and Nikkei 225 declined by as much as 4.50% during last week trading session. US rates have risen to 7-year high, thus posing further questions as to the whether the Fed will be maintaining its rate hike path next year.

Interestingly, companies active in precious metals exploration and extraction are benefitting from that trend. Such is the case of SSR (Silver Standard Resources), whose share soared by almost 19% amid mounting worries and strong Q3 mining production report. The company recently has seen its production rising from its three mines Marigold (US), Seabee (Canada) and Puna (Argentina) by 33%, 18% and doubled its zinc production at Puna operations. Effective Q3 results are expected on 8. November 2018, and according to CEO Paul Benson, Q3 has been the strongest quarter of the month. The CEO remains confident that SSR can beat annual production guidance (gold: 275’000 – 302’000 ounces, silver: 2.3 – 3.3 million ounces) for the seventh consecutive year.

Accordingly, ECB monetary policy meeting next week will take center stage, as worries relating to the Italian budget along with a slowing economic growth outlook could force the monetary institution to postpone its tightening cycle, which would ultimately lead to a rise in spreads and therefore weigh on the single currency. Therefore, an investment in gold-related assets could be a way to face dragging uncertainties from the marketplace.

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