Last month a lot of negative data on the global economy was brought to light. China’s trade plunged in March and the World Trade Organization cut the 2015 global trade growth outlook to 3.3 percent from the previous 4 percent. We have already suggested in the Gold News Monitor that weak worldwide trade indicates a coming global slowdown. It is time we shared more details and in this edition of Market Overview we analyze whether the global economy is coming into recession and what it would mean for the U.S. economy (is it really decoupling from the other economies?) and the gold market.

To answer these questions we must examine the correlation between the yellow metal and world GDP growth. How the gold performs during recessions? Does it behave well as investment demand increases or rather badly, because of drop in consumer demand in times of weak economic activity?

We dig also into data on global liquidity, since the BIS and the IMF are warning against global liquidity shock. Market liquidity is structurally lower now than it was in the past, so if the pace and scale of Fed’s tightening are not correctly anticipated by the investors, the possible Fed’s hike could trigger a sell-off in the bond markets similar to the U.S. bond crash in 1994. What are the possible consequences of such shock for the gold market?

In response to numerous questions from European and Asian investors, we also analyze how gold behaves when measured in different currencies than the U.S. dollar, what is the explanation for the negative correlation between gold and the U.S. dollar index and what non-American investors should take into account analyzing their investment in gold.