Posted on Aug 09, 2019 at 12:00 am
Gold prices have risen nearly 16% this year, and by around $ 100 an ounce this week, as investors turned to the precious metal seen as a safe haven amid the bruising US-China trade and currency war.
As the week opened, PBOC of China fixed Yuan at 6.97% against the dollar and Trump and US Fed commented that the China is acting as a currency manipulator. As, mentioned previously that whatever Trump has done against China in its history is the worst trade war of this decade. There was obvious that pain boomeranged into the US markets and Dow slipped nearly 750 points on Monday- the worst single day fall of 2019. And big time sufferers are US companies and global economies as they are on the verge of recession.
Gold hit $1485 and that was a major target that I made clear over the time and now this parabolic rise should stop, unless China does something nasty to un-nerve.
The dimming global economic outlook, fuelled by heightening trade tensions between the U.S. and China are boosting gold’s appeal as a hedge against financial turmoil.
Gold is likely to show higher volatility and now over all range is expected to be $1500-$1550.
Despite Chinas commitment, the PBOC fixed Yuan at higher level and fixed USD/CNY at 7.05% on Wednesday. Gold is once again moving to new calendar year highs and it hit $15 higher. Now gold is also behaving like a currency when there is losing streak for USD as the global currency status. These are extra ordinary times and no matter how the USD index or the US data comes out, there is next big leg of rally possible on both.
On Thursday, gold showed an intraday volatility of +3%. This kind of fluctuation exhibited in the global markets too. Meanwhile gold hit 5.5 years high of %1522 and also made the single biggest gain of 3 years at 17.25. Moreover the US China trade war has been intensifying in a slightly uglier manner and this is adding fuel to the rally in gold prices.
Gold is at record breaking high in the domestic markets too. Gold prices on Thursday soared past the Rs 38,000-mark for or the first time rising Rs 550 to hit a fresh high of Rs 38,470 per 10gm here in the capital. In Mumbai, agency reports pegged the price of 10gm of standard gold (99.5 purity) at Rs 37,091, while pure gold (99.9 purity) cost Rs 37,240 on Thursday
Gold remains relevant given the elevated economic and geopolitical risks. Investors will continue to shift their strategic portfolio positions in favour of gold. But I would advise all investors to play cautiously and take utmost care while trading in these high volatile patterns.