Expert opinion

A new tool to provide a complete information to get into the market of diamonds and gold.

Growth stocks have been outperforming their value counterparts for quite some time now. Rapidly expanding technology companies have been at the forefront of this trend, but we think it could be starting to reverse, at least partly.

Typically, there is an inverse correlation between the value of the dollar and that of gold. When the dollar loses purchasing power, then the value of other currencies increases and so the demand for commodities. The investors look for alternatives to protect value: gold, a typical safe haven, is a preferred choice.

Not always the inverse relationship is true. There have been times when both assets have risen or fallen together. Many factors drive the U.S. dollar’s trends, like monetary policy, U.S. inflation, economic prospects. Nevertheless, the correlation coefficient calculated between the returns of the U.S. Dollar Index and the price of gold sticks, most of the times, around negative values.

The EUR/USD currency pair confirmed an upward trend on Thursday, as the US economic reports failed to provide sufficient support for the Greenback. The Euro gained 0.17% against the US Dollar to continue a side move above the 1.1890 mark until the Friday morning session. The National Association of Realtors revealed that pending home sales in the United States fell 0.8% over the month of July, as the property market kept facing hurdles form a limited supply of available houses, which pushed prices up.

Today’s markets can be challenging when seeking sustainable yields, but that doesn’t mean investors should give up the search.

What factors would determine the future performance of gold prices?

I suppose that it is all about the outlook for the trend of interest rates in the United States. By that I mean the Treasury Inflation Protected Securities yield and the federal funds rate. In my opinion, these would be the factors that will drive the price of gold. At this point in time, our view is that the fed fund rate will be moving higher, thus, we are not anticipating much more strength in gold prices, not much beyond the $1,300 to $1,350.

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About 60% of stock market transactions are now coming from computers fed with algorithms based on great quantities of data. That may account for the extremely low volatility registered recently as competing algorithms buy and sell, trying to eke out profits from minimum movements in prices. Another factor is the policy of many companies implementing stock buyback programmes that benefit shareholders and reward executives by keeping the shares of the company at ever higher prices even though earnings do not justify the rise in the stock price.