It is not big news that the avalanche of doubt, uncertainty and volatility is hugely influential to investors, who are moving toward secure refuges such as gold. Yesterday the precious metal rose 1.27% to $1,833.60 per ounce after hitting a high of $1,920.70 per ounce last week.
According to ETF Securities, many investors continue to seek refuge in gold, and ETFs that track the metal are registering their highest influxes of capital in three years. A report issued by Morgan Stanley affirms that gold could exceed the record that it hit in 1980, and according to their calculations there is an 85% chance that it will end up between $1,819 and $2,085 per ounce next year.
But could we be sowing the seeds of a novel investing climate? Lately, ETFs that track petroleum have also seen capital influxes greater than at any other time in the past two years. How can gold and crude rise simultaneously?
Recession or weak growth?
Money pouring into the gold market could signify something else: that investors are not discounting for a W soft recession as did the International Energy Agency (IEA). Yesterday, the organization cut predictions for crude demand in 2011 and 2012 to 400,000 to 200,000 barrels per day, respectively.
Could it be that that investments in funds that replicate the behavior of oil could be the best indicator of a weak growth scenario, i.e., not of a recession? In this vein, we would look at recent macro data published: the ISM of services and manufacturing published higher figures than expected, maintaining the quota of at least 50%. Anything below this level would be a sign of recession.
