The Daily Market Report: Gold Jumps to tart New Year, Despite Dollar Strength

03-Jan (USAGOLD) — Gold eked out a new 3-week high on the first trading day of the year. The yellow metal jumped after early gains in yields, stocks, oil and the dollar all reversed course.

Initially we were impressed by gold’s resilience after U.S. 10-year yields neared 2-year highs around 2.60%, which prompted the dollar index to set a new 14-year high of 103.82. However, after a stunning $3 reversal in oil, yields tumbled and the dollar backed off those highs, buoying gold in the process.

Political uncertainty seems to be helping to underpin gold as well. Ian Bremmer’s Eurasia Group goes so far as to call the current environment a “geopolitical recession.”

This year marks the most volatile political risk environment in the postwar period, at least as important to global markets as the economic recession of 2008. It needn’t develop into a geopolitical depression that triggers major interstate military conflict and/or the breakdown of major central government institutions. But such an outcome is now thinkable, a tail risk from the weakening of international security and economic architecture and deepening mistrust among the world’s most powerful governments. — Eurasia Group

This is reflective of our own words of caution, dating back to the Brexit vote last summer. Political and geopolitical uncertainty will likely drive investors to safe-haven investments such as gold. Add to that the escalating concerns over hacking and investors have a pretty compelling case for moving at least a portion of their wealth into a physical asset that they can maintain in their own possession.