Geopolitical Concerns and Gold: What’s the Outlook?
The French election is over, and Emmanuel Macron is the president. He won after beating his far-right wing rival Marine Le Pen. With this result, European market uncertainty has receded.
Interested in ASR? Don't miss the next report.
Receive e-mail alerts for new research on ASR
According to Pensions & Investments, UBS global chief investment officer Mark Haefele stated that the French election outcome will provide “relief to investors.” He added that “we expect European markets to refocus on the Eurozone’s economic recovery and a gradual reduction of monetary stimulus from the European Central Bank starting early next year.”
North Korea tensions
Although some uncertainty has faded, other geopolitically risky situations persist. On May 14, 2017, North Korea declared that it has test launched an intermediate-range ballistic missile. Many experts feel that it is its most advanced. Tensions between the US and North Korea are palpable. The latest missile test and continued threats by global leaders will only escalate the situation further.
Geopolitical tensions and gold
Gold and other precious metals are known for their safe-haven status. When uncertainty mounts, investors head for assets with safe-haven appeal and low counterparty risk. Some investors might cling to gold in fear of further escalation around the world.
Uncertainty and instability are usually conducive to higher gold prices (GLD) (IAU), which could have a positive effect on gold equities such as Hecla Mining (HL), AngloGold Ashanti (AU), Alacer Gold (ASR), and B2Gold (BTG). Combined, these four stocks make up 9.5% of the price changes in the VanEck Vectors Gold Miners ETF (GDX).