Gold prices inching towards new highs

Analysts predict that gold prices, already hovering around six-year highs, may surpass US$1,600/ounce over the next few months as investors are taking refuge in safe haven assets. The bearish global economic outlook, fueled by Sino-US trade war is boosting gold’s appeal as a hedge against financial turmoil. If growth worries persist gold prices could go even higher. Last week, Bank of America Merrill Lynch analyst Michael Widmer said the metal could climb toward US$2,000 in the next two years. The spot price has touched a record high of US$1,921.17 in 2011.

On Monday, 9th September 2019, spot price of gold was up 0.3% to US$1,511.30 by 0117 GMT, after falling in the earlier session. The moves came on the expectations of monetary policy easing by the world’s major economies amid soft economic data, although an uptick in equities capped gains. To forecast the future price movement one must keep an eye of some of the leading economies.

The US job growth slowed more than expected in August, with retail hiring declining for a seventh straight month, but strong wage gains should support consumer spending and keep the economy expanding moderately, despite rising threats from trade tensions.

Jerome Powell, Chief of US Fed, said on Friday in Zurich that the US would continue to act ‘as appropriate’ to sustain the economic expansion in the world’s biggest economy.

China’s exports fell in August as shipments to the US declined sharply, pointing to further weakness in the world’s second-largest economy and underlining a pressing need for more stimulus as the Sino-US trade war escalates.

British Prime Minister, Boris Johnson is sticking to his Brexit plan and will not seek a delay to Britain’s departure from the European Union at a summit next month, despite the latest resignation by two ministers from his government.

Japan’s economy grew at a slower pace than initially estimated in the second quarter on the back of softer capital spending, signaling strains on the economy from weaker global growth and the Sino-China trade war.

As trade war is unlikely to be resolved soon, gold has resumed its traditional role of a safe-haven asset. The holdings in ETFs are now heading toward peak levels seen in 2012. On Wednesday, Goldman raised its 2019 outlook for ETF demand to 600 metric tons this year, from 300 tons, and boosted its six-month price forecast after the metal surpassed US$1,475. UBS Group AG and Citigroup Inc. are also bullish on gold, forecasting prices could rise to as high as US$1,600.




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