We aren’t living in your grandfather’s trading environment anymore. Traders need to keep their finger on a lot of pulses these days. Maybe you’re a Gold bug looking to focus only on the technical and fundamental factors affecting this precious metal. Or maybe you are also trading crude oil. But wait, there’s the Indian growth data to consider and what did Mario Draghi just say? Throw a bunch of economic reports and indicators as well as inter-related global markets together and everything from soup to nuts seems to matter to the markets now. The truth is, knowing where this precious metal is going can be difficult.
Regardless of where you fit on this spectrum, there are three macroeconomic factors you need to remember when trading Gold and one technical solution that can help you quantify this seemingly unquantifiable data.
How to make money when interest rates are negative
You can’t. It may seem counterintuitive, but if you put your money in the bank, you will have to PAY them to hold your cash. The Bank of Japan followed other central banks in going negative on rates in late January, a sign of the continuing global trouble from plummeting low oil prices, stalling international trade and slowing growth in China. Japan’s Prime Minister, Shinzo Abe, is seeking new ways to break the country’s cycle of decline. The BOJ joins a growing group of global central banks with negative interest rates including the European Central Bank, Sweden, Denmark and Switzerland.
So this all should be good for Gold, right? Global central bankers remain concerned about sluggish growth and below-target inflation. This loose monetary policy around the world should be a bullish sign for Gold as this is a hard asset that should gain in value.
Gold isn’t the only metal that matters
There are many things that affect the price of the metal. Comex copper futures tumbled to their lowest level in late January since April 2009. While they have rallied back recently, China’s insatiable appetite for copper has tumbled as their aggressive building and construction phase slows. Weak copper demand signals global growth is likely to remain weak, which will keep global central banks with their hands on the easing button, which should be a long term positive for Gold.
Stock market correlation affects Gold
When things were getting super dicey for US equities in January, Gold was rallying. The standard view is that these two markets are inversely linked: when the stocks go up, the yellow metal dives, and vice-versa. Why do we often see a negative correlation between the stocks and the shiny metal? When traders go into defensive mode, they may prefer Gold as opposed to riskier stocks. The saying goes that this metal is a safe-haven, so naturally it’s correlated inversely (or, at least, uncorrelated) to stocks during a serious financial turmoil.
The stock market has rebounded but volatility seems to be here for the long haul. These economic factors make it tough to quantify the true impact on the price of Gold. It’s difficult to decide which input should be weighted the most.
By combining Intermarket Analysis with a Neural Network process, VantagePoint quantifies these relationships. The end result is the output of an accurate forecast of where Gold is heading.
To see this technology in action watch the video below. You’ll see recent market forecasts for Gold as well as stocks that are impacted and influenced by the price of Gold.
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