😎 Gold shines, China is dull

What’s going on here?

The price of a bar of gold hit a new all-time high on Friday as investors sought shelter from macroeconomic and geopolitical storms.

What does this mean?

Gold’s price has shot up over 30% this year, which is remarkable considering that the US economy has held up well and government bond yields have remained high. If the US economy was tumbling toward a recession and falling interest rates were reducing the income of other assets, that could explain gold’s price rising. But those things aren’t happening, so it suggests investors are more nervous about the future than they’re letting on. And maybe they’re right to be: geopolitical tensions haven’t exactly eased, the risks of high inflation and a slowdown in growth still loom large, government debt is dangerously high, and central banks are stocking up on gold rather than greenbacks. The record price on the bricks is sending a message: uncertainty is brewing, so stay prepared.

Why should I care?

For markets: The rising weight of gold.

With interest rates likely to dip, geopolitical risks still simmering, and the US dollar losing some steam, gold’s rally might have fuel left yet. That said, with prices already at record highs, some of those things may be baked in. So for gold to push even higher, a lot will depend on how investors feel – and whether they’re willing to buy into gold in a big way after years of playing it cool.

For you personally: Portfolio bling.

History shows that a classic portfolio of stocks and bonds usually does the job, with bonds stepping up when stocks slip. But 2022 was a reminder that when economic growth stalls and inflation spikes, stocks and bonds can both take a hit. That’s when folks turn to gold: it’s a safe haven that tends to perk up when other assets stumble. Plus, with its limited supply and intrinsic value, the yellow metal is a solid store of wealth – more attractive than, say, traditional currencies, which can be printed endlessly. Having some gold in your portfolio, then, could help keep things steady when markets get rocky.

What’s going on here?

China narrowly beat out economic growth forecasts last quarter, despite lingering problems.

What does this mean?

China’s economy expanded by 4.6% in the third quarter, compared to the year before, helped by a rise in factory output and surprisingly strong retail sales. But slower growth in the third quarter compared to the second suggested that the world’s number two economy is still losing steam. For instance, while spending on roads, factories, and other “fixed assets” is up 3% this year, investment in the all-important property sector is down 10%. So the People’s Republic stepped in to prop things up with some fresh stimulus goodies on Friday, in hopes that the economy won’t fall short of its 5% growth target for the year. That included a program to help companies and major shareholders buy back stocks, and another that’ll make it easier for big banks and investing houses to borrow money and pour it into the stock market. The idea is to get more moolah flowing into companies and jobs and help juice the economy.

Why should I care?

For markets: Waiting for the big bazooka.

Chinese stocks saw a huge rally in September as traders cheered an earlier batch of fresh government help. But the actual follow-through fell short of what they’d hoped for, and the rally fizzled out almost as quickly as it began. This time around, investors will hope China’s economic support plans are more serious – but they’ll want to see a bit of economic progress as proof. If that happens, those cheap and unloved Chinese stocks could rally again.