Gold climbs to 3-month peak
Gold prices on Tuesday hit their highest level in more than three months, as a weak dollar and geopolitical tensions encouraged investors to buy the safe-haven metal.
The yellow metal, which rose about 19 per cent in 2019, is expected to continue its upward trend in 2020 due to a slowdown in the global economy, buying from the central banks, and an end of quantitative easing programmes by major central banks.
Spot gold prices rose 0.4 per cent at 1,520.73 per ounce by 1306GMT after hitting $1,525.20 - its highest mark since September 25, 2019. US gold futures rose 0.5 per cent to 1525.90. With 19 per cent gains in 2019, gold was on track for its best annual performance in nine years to conclude the year on positive note after a decline of 2.66 per cent in 2018.
"The precious metal has scope to extend gains into 2020 on dollar weakness. Looser monetary policy across the globe, the Brexit, and a return of trade uncertainty should support appetite towards the metal. A yearly close above $1,500 should open the gates towards $1525, $1540 and $1555," Lukman Otunuga, senior research analyst at FXTM, told Khaleej Times on Tuesday.
He said that the outlook for gold for the first quarter of 2020 will be heavily influenced by the US-China trade development and the dollar's valuation. "Easing concerns over global growth coupled with de-escalating tensions are likely to dent appetite for safe-haven gold," said Otunuga.
Other analysts and market experts said that gold should perform well in 2020. Goldman expects gold to rise to $1,600 this year due to the yellow metal's appeal as a hedge against financial turmoil, including more problems on the trade front and the potential for debt collapse. In addition, central banks across the globe are expected to continue gold buying in 2020 after purchasing approximately 550 metric tonnes by the end of September quarter.
"We are entering into 2020 on positive note and should see a rise in the gold price in first quarter as central banks such as Russia, China, and Turkey will continue gold buying. Gold's next potential price target is up to $1,725 with some predicting even higher value although not necessarily in 2020," according to an expert. "Gold successfully went through $1,500/$1,525 barrier and is now on track to surpass the September high of $1,557.11 per ounce."
Investor interest in gold has surged this year due to a raft of geopolitical uncertainties, including the China-US trade war, Middle East tensions, and protests in Hong Kong. Bullion was also supported by rate cuts by major central banks, including the US Federal Reserve cutting three times before it signalled it would keep rates unchanged through 2020. Lower interest rates reduce the opportunity cost of holding non-yielding bullion.
KP Abdul Salam, group executive director of Malabar Group, said that the gold outlook for 2020 is quite positive.
"The 25th edition of DSF, influx of tourists, Expo 2020 will all act as catalyst to bring in more customers to our stores," Abdul Salam told Khaleej Times.
To a question, he responded that 2019 had its own challenges and that gold fluctuated accordingly. "The price of gold was high which affected the sale of gold jewellery. Despite this, the festive season was good and we saw an increase in footfalls as well as sales," he said.
Margaret Yang Yan, a market analyst at CMC Markets, said that gold prices also rose on year-end bargain-hunting. "One of the main drivers behind gold's gain is the weakening in the dollar. However, the upside is kind of limited because quantitative easing or rate-cutting cycle has come to an end for now and we don't see a possibility of any rate cuts in 2020," she said.
Jeffrey Halley, senior market analyst, Asia Pacific at OANDA, in a research note said that the next resistance is at $1,535 an ounce. "With liquidity much reduced in Asia, there is some potential for gold to spike higher on low volume with some risk hedging added into the mix," he said.
Further supporting gold, Asian shares slipped as investors locked in gains after a buoyant year of gains. Speculators raised their bullish positions in COMEX gold contracts in the week to December 24.
"There are still a lot of uncertainties that we are taking into 2020, we don't know where the (China-US) trade war is going, the tensions around the Iran issue is also not helping," said Afshin Nabavi, senior vice president at precious metals trader MKS SA.
"I see gold being supported in 2020 as well, until questions around all uncertainties have an answer," he said, adding that investors are banking more on gold as a safe-haven asset than the dollar.
The dollar slipped against a basket of rivals, hovering close to a 6-month low hit last week, making gold cheaper for holders of other currencies.
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