Gold remains re-committed
Posted on Dec 04, 2019 at 12:00 am
Gold has risen more than 13% this year mainly due to the trade dispute driving demand for safe assets
The policy U-turn by central banks suggests they do not have full command over the global economic situation. This, alongside an unpredictable White House, the rise of populism, de-globalisation, de- dollarization and questions over the future of capitalism itself, have led to a feeling of instability from which gold has certainly benefited.
But in these uncertain times, gold has once gin proved its worth. It appears that gold has been one such haven investment and investors will also agree to this. Where on one hand the FTSE 100 index gained just 2% over the past 12 months to mid October, on the other hand gold has gained 21% in the same time frame.
The recent strength comes after a wobbly few years for gold, which have seen it struggle to break above $1,350. Its rise coincides neatly with 2019’s falls in US interest rates.
After the thanksgiving note, there was a good positive opening mostly in Asian markets as China indicated that they are still in fray of a deal with US for this phase, deal to happen so beginning of the month is full of data pack from US and EU.
Further, there was a tense kind of situation in the EU wherein countries demanded their gold back.
Just a few short days after Poland’s government touted its economic might after completing the repatriation of 100 tons of the barbarous relic; and with Hungary's anti-immigrant Prime Minister Viktor Orban also ramping up holdings of the safe-haven asset to boost the security of his reserves; more Eastern European nationalist leaders are demanding their country's gold back on home soil.
The various leaders have a recent example to prove their fears right as the Bank of England refused to return Venezuela’s gold stock over political differences.
In spite of the geopolitical issues, gold price fell on Monday as investors turned to riskier assets on signs of economic growth following reports of an expanding Chinese factory sector and as a rising dollar reduced demand.
Spot gold was down 0.5% at $1,456.70 per ounce by during Mondays’ trading hours, having earlier touched it’s highest since Nov. 22. U.S.
Positive data released from the Chinese markets, unexpected expansion numbers in factory activities during November, led to a spur of investor in the equity markets as further positive releases were expected from other countries.
Any positive data released, creates optimism in the market thus giving confidence to investors who then move to riskier assets which in reduce the safe haven demand for the yellow metal.
Investor demand for gold was further pressured by the rising dollar, which makes dollar-denominated gold more expensive for buyers using other currencies.
Trade dispute between the United States and China has supported gold, with reports that a preliminary agreement has now stalled because of U.S. legislation supporting protesters in Hong Kong and Chinese demands that the United States roll back its tariffs as part of phase one deal.
Nonetheless, Gold has been the star performer of 2019, but does the gold rush have further to run?
The basics are still quite supportive, this lull is not going to last too much longer. Maybe into yearend we will see gold prices recommit the uptrend and is expected to trade between $1,450-$1,500.