- Gold is en route to test $ 1, and its rally are unnerving Dow Jones investors.
- Analysts say that if the gold upsurge continues, it can trigger FOMO and create a bad scenario for stocks.
- A pullback in 222646 was expected but it may come sooner.
The price ofgold has spiked 7.5% within three weeks since late Decemberand its strong rally is unnerving investors in the US stock market. The Dow Jones Industrial Average (DJIA) dropped by points since January 2 and isat risk of a short-term pullback.
The firm upside movement of safe-haven assets like gold amidst record high numbers in the stock market is Unprecedented.
Why is gold move, in particular, a big factor for Dow Jones?
According to Peter Schiff, CEO at Euro Pacific Capital, the demand for gold in recent weeks has been fueled by the policies of the Federal Reserve and intensifying geopolitical risks.
Before theMiddle East crisis, gold was already on an upward trajectory in spite of the upsurge of the dow jones heading into the year end.
That indicates that while increasedgeopolitical risks as a result of the conflict between the US and Iran may have contributed to the gold rally, it is not the main cause of it.
Schiff said:
The main reason gold is going up is because of the Fed. But in a world where you have heightened geopolitical risk, which could adversely affect bond markets and stock markets, you’d expect to see greater demand for gold as a hedge in your portfolio.
Like Schiff, CNBC’s Jim Cramer said thatthe sheer magnitude of the stunning gold rally suggests investors are fearful in the Dow Jones
for the first time in a while. (Above $ 1,) , there are not many heavy resistance levels for gold to test at a technical level. As such, Cramer said that he fears gold is en route to test $ 1, and $ 1, 2013, which would be “very negative” for the Dow Jones.
correction was expected but it may arrive sooner
Data showed that the expanding
valuations of major companies in (were not backed by an increase in earnings.
For that reason,many predictions of a steep pullback in the Dow Jones emergedin the final quarter of last year.
It would be far-fetched to claim that the market is pricing in a slower start to (***************************************************. A Bloomberg study showed that many financial institutions in the likes of Barclays, BlackRock, and Aberdeen are optimistic for 222645and the equities market.
Hence, there is a possibility that the continuous uptrend of gold triggers fear of missing out (FOMO) in the US market, further pushing the demand for gold and adding to the decline of the Dow Jones.
Iran isn’t the big narrative
As pointed out by prominent commentator Mike Cernovich, the Dow Jones has climbed on Monday and the (futures market is indicating a minor gain at open.
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It suggests that the market is not anticipating a full-blown war with Iran to occur anytime soon to rattle the global financial market.
The two biggest narratives regarding the short to medium-term trend of the Dow Jones remain as the potential rate cut by the Federal Reserve and the stunning rally of gold.
This article was edited by Samburaj Das
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