Weak Global iPhone Sales Could Boost Gold’s Safe-Haven Appeal - FXTM
(Kitco News) - Negative sentiment continues to build around tech giant Apple (Nasdaq: AAPL), and some analysts have warned that slower iPhone sales could have broader implications on global growth that could benefit safe-haven assets like gold.
In a report Tuesday, Hussein Sayed, chief market strategist at FXTM, said the little smartphone had a significant impact on U.S. gross domestic product growth and the global economy. The comments comes following growing concerns that smartphone demand has started to fall, which could be an indication of weaker economic activity moving forward.
"When looking from a global perspective, mobile technology and services are estimated to have added $3.6 trillion or 4.5% to 2017 global GDP, according to the IMF. China exported $128 billion worth of smartphones representing 5.7% of its total exports. Meanwhile, in Korea, semiconductors alone accounted for 17.1% of total exports," he said in the report. "That's what makes the iPhone and other smartphone sales a vital indicator of global economic growth."
In an emailed statement to Kitco News Wednesday, Jameel Ahmad, global head of currency strategy & market research at FXTM, said that in the long term, gold looks attractive in an environment of lower global growth. However, he added that near term the yellow metal faces significant headwinds from surging in momentum in the U.S. dollar.
"It is the dollar that is driving global markets right now and more so than fears over global stock market volatility, which is why gold has slipped over recent sessions," he said. "Until the market redirects attention away from the dollar and accepts the concerns over global economic growth, it is difficult to see where gold finds the inspiration to drive past the three-month highs seen a few weeks ago anytime soon."
While U.S. dollar strength will keep a lid on gold, Ahmad said that another round of aggressive equity market weakness and rising volatility could provide some support for the beleaguered precious metal.
Comex December gold futures last traded at A$1,201.70 an ounce, relatively flat on the day. Meanwhile, the U.S. dollar index continues to hover near its highest levels since June 2017, last trading at 97.16 points, up 0.22% on the day.
In equity markets, major banks are downgrading their outlooks for Apple and iPhone sales. Wednesday, Guggenheim downgraded Apple to neutral from buy; at the same time, both UBS and Goldman Sachs lowered their price targets for the tech company.