Recession “Code Red” Triggers Gold Rush
Published on: 10/14/19 8:41 AM
The second week of October 2019 saw an FX Market soured by geopolitical sabre rattling in Europe, the Middle East, and confirmation of recession predictions. Additionally, currency pairs and crosses volatility contributed to safe haven bias for gold. Forex Broker comparison service FXBrokerFeed brings you news, and trends in the FX Broker Market, featuring a “Code Red” recession warning, and gold on the uptrend.
Professor Campbell Harvey, who is credited for the “inverted yield curve” as an economic forecasting model
was categorical about a looming recession.
“It happens when short-term treasury yields are higher than those with longer duration”, said Harvey in an interview for “The Compound” on YouTube.
“A curve needs to stay inverted for three months to be reliable. In the recent cycle, the curve inverted briefly in March then turned lower again in May where it has stayed since. It’s not normal. It’s something that foreshadows bad times”, he added.
However, businesses may avoid recession by delaying spending for the next 18 months. “That delay could lead to slower growth, but it’s possible to look at this as risk management,” concluded Harvey.
Additionally, incoming IMF Director Kristalina Georgieva warned of a “synchronized slow-down” citing trade tariffs war uncertainty as a major headwind to global GDP.
She added that “growth this year will fall to its lowest rate since the beginning of the decade” and also expressed concern about the global impact of the disruption of cross-border supply chains.
The warnings come at a time the market is continually inundated with negative short term, and long term indicators. It seems the financial crisis currently facing the United Nations may be partly attributable to recession.
Gold on Bullish Upsurge
The ETF’s market witnessed gold holdings surge by 13.7% to clinch a 6 year high as investors opted for the precious metal. The demand for gold has been fueled by increasing volatility in the currency dominions.
Also, geopolitics and economic data
continued to influence gold prices with support at around $1,450, and resistance above $1,500 pivot to sustain a bulls rally.
Any further price fluctuations will largely depend on FOMC minutes, Brexit, and US/China trade tariffs meeting outcomes in addition to ensuing market sentiment.
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