(Kitco News) - So, did you buy the dip in gold? Last week, we warned investors that the gold market could see some short-term selling pressure as speculators took profits due to slowing bullish momentum.
While gold isn’t out of the woods just yet, the market continues to show its resilience as we end the week above $2,900 an ounce.
The precious metal is following the trend that started last year as short-term dips are quickly bought. Since gold’s rally began in October 2023, the average weekly loss has been only about 0.6%. In the last 75 weeks, gold has seen only 32 weekly losses of more than 1%. Of those, there have been only six weekly losses of more than 3% and two 5% drops.
At the same time, there have only been nine consecutive weekly losses in gold since this rally started; only two corrections have lasted longer than two weeks.
The bottom line: gold’s corrections have been short and shallow, so if you want to buy the dip, you have to be quick.
It’s not surprising that gold has been in a strong uptrend. The global economy has been inundated with chaos and uncertainty, and this week has been no exception.
The week started with the U.S. removing itself from the world stage as the global police force, which forced Europe to scramble to support Ukraine in its continued war with Russia. The result is that the European Union has launched a nearly €1 trillion spending package to boost member nations’ defenses.
This means that large deficits will continue to get bigger. Growing global deficits mean fiat purchasing power will eventually weaken, leading to higher inflation and lower growth, the perfect environment for gold.
There was even more chaos in North America as Trump launched a two-day trade war with Mexico and Canada, significantly spooking equity markets. While the S&P 500 has bounced off its lows, it is still ending the week down 3%, its biggest decline since September.
Economists have noted that the chaos surrounding the U.S. government’s tariffs on imported goods is weighing on investor and business sentiment. According to a growing number of business leaders, President Donald Trump’s flip-flopping on tariffs is creating significant volatility, making planning and long-term investment decisions difficult.
Economists have warned for months now that tariffs and a global trade war will drive prices higher and hurt growth, creating another positive stagflationary environment for gold. At the same time, gold’s low correlation to all other asset classes makes it an attractive safe-haven hedge.
That’s it for this week.
Have a great weekend, and I hope you are buckled up because this wild ride doesn’t look like it will be stopping soon.
