Global Risks and Inflation Could Push Gold Higher

2018 is turning out to be an interesting year, and one that will be consequential for the financial markets. The year started with the unravelling of the cryptocurrencies market, with the main assets falling by more than 50%.

Then, the global financial markets started to fall, proving that the markets could still fall. Then, United States government bonds started a sell-off, with the 10-year rising to more than 3%.

Then, yesterday, Trump rattled the financial markets by talking about tariffs to the Steel and Aluminum imports in a bid to protect local companies. This will definitely open doors to a new trade war across the globe. As past events have shown, trade wars are never beneficial to any country.

Yesterday, Putin held a State of the Nation speech which he showcased his latest weaponry.

All these happenings will likely lead to more demand for safety haven assets such as gold. As shown below, the inverse relationship between gold and the dollar has become evidence YTD.

This year, gold has traded within a narrow range. It has had a high of $1,365 and a low of $1300. At the current price of $1307, gold has had a 50% retracement from its peak price of $1365. There is a likelihood that gold will breach the $1,300 price and if it does, markets will watch out for the next Fibonacci Retracement level of $1285. Ultimately, a combination of global risks and increased inflation may push the price higher.

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