Gold and Its Response to ‘Risk on’ and ‘Risk off Markets’

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By Giles Coghlan, Chief Currency Analyst at HYCM

Gold, which is measured in dollar terms (XAUUSD), loses value when the market is pursuing risk on assets.When the market is pro risk we tend to see Gold losing value. An example of this was on November 07 , 2019 (last week!) when China’s Commerce Ministry expressed a willingness to start rolling back tariffs on the signing of the US-China ‘phase 1’ trade deal. By contrast, when the market is worried and moves into a ‘risk off’ mood, then Gold increases in value. The general bid in gold over the last months has been due to concerns about a low growth, low interest rate and low inflation environment. Investors have sought the safety of gold to try and lock in alpha.

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