Another day of lacklustre performance on the stock market has seen gold move into a strong position, holding price gains at a critical level above £1,479 ($1,850). This comes as the S&P 500 wavers on the knife edge of bear territory following another bruising day of sell offs.
The worrying trend has seen talk of stagflation now becoming much louder, with Société Générale now saying that it sees notable stagflation risks weighing heavy on US markets. Bank of America has said that this flight from equity markets suggests that investors are now keenly aware of slowing economic growth. It expects the S&P 500 to shed more value and sink to a low of 3200 by year end.
CrossBorder Capital analysts are in agreement, noting “If we think of the fall in stock prices so far as the first leg down in the market, associated with falling P/E multiples, then this second-leg down may be driven more by a collapse in earnings. We look set for at least a 30% peak to trough decline in the major indexes.”
This environment provides the perfect conditions for gold to thrive.
