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Jump in gold price spells bad news for economy

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Things do not look good for the global economy today as the gold price, the best indicator for global economic conditions, hit a three-week high.

Gold is considered the safest investment asset and is the last resort of investors when other investment options look risky. As more investors buy gold, the price goes up.

On Wednesday morning an ounce of gold cost $US1,219.40.

All the world’s major share markets took a hit yesterday, including the US, the UK, China and Japan. Australia’s ASX also fell.

The sudden and dramatic drop in the price of oil, which began in December, has created a high level of volatility in global markets, with investors unable to decide whether cheap fuel is a good or a bad thing for economies in general.

US oil prices fell to a fresh 5.5-year low of $US47.93 a barrel. Other worries pertained to the drop in US Treasury bond yields and uncertainty in Europe over whether Greece will remain in the Eurozone after the upcoming election.

“The market doesn’t like uncertainty and the volatility in oil and the volatility in interest rates have certainly created uncertainty,” said David Levy, portfolio manager at Kenjol Capital Management.

“The situation in Europe is also very uncertain and we’re lacking a positive catalyst as of today.”

– with AAP

Topics: Economy
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