Gold again proves disastrous as a risk hedge

Tuesday, 14 August 2018

I’ve been having this conversation regularly lately. Gold is falling and breaking support just as global markets tilt towards a possible risk accident:

Once again gold is proving that it is the absolute opposite of a cyclical safe haven. When markets crash so does it. Notice that exactly the same thing during the GFC, even in Australian dollars:

When panic hits markets they dump the periphery and head for the US. This phenomenon has only intensified in recent years as cratered US interest rates made the USD the funding currency of choice for carry trades.

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About the author

David Llewellyn-Smith is Chief Strategist at the MB Fund and MB Super. David is the founding publisher and editor of MacroBusiness and was the founding publisher and global economy editor of The Diplomat, the Asia Pacific’s leading geo-politics and economics portal. He is also a former gold trader and economic commentator at The Sydney Morning Herald, The Age, the ABC and Business Spectator. He is the co-author of The Great Crash of 2008 with Ross Garnaut and was the editor of the second Garnaut Climate Change Review.