After gaining more than 15 per cent so far in 2019, the price of gold is set to record its strongest annual growth in almost a decade.
The growing global economic and political uncertainties are pushing investors to want to invest in the safety of gold and therefore traders expect the price of gold to continue to rise next year.
On September 4, a time when the market uncertainty over the US-China trade war was at its peak, a high for the year was reached by the gold price at $1,551.83 per ounce.
The price fell gradually after the two largest economies of the world slowly got together to reach an agreement on a partial trade deal. As of December 22, the fold price was a $1,479.61 an ounce, a 15.4 per cent hike compared to its price at the end of 2018.
The last occasion in recent times gold prices had seen a greater jump was in 2010 when it appreciated by about 30 per cent. Hong Kong’s benchmark Hang Seng Index, which has climbed almost 8 per cent, was beaten by the returns generated by gold investment this year.
“The main driver of the gold price this year has been lower global interest rates amid heightened geopolitical tension in Europe over Brexit, as well as the trade war between the US and China,” said Stephen Innes, chief Asia market strategist of AXI Trader.
Innes said that investors were pushed into making extensive investments in gold which drove up its prices because of fears of a global recession as a fall out of the political and diplomatic turmoil.
“Ultimately, the softening global economy as a result of the trade war has forced central banks to lower interest rates which meant the risk-free cost of holding gold versus a lower US treasury yield,” he said.
The outcome of the trade related negotiations and broader economic outlook will influence gold price which, Innes believes, would be between $1,300 and $1,600 an ounce next year.
For Jasper Lo, another veteran gold trader, the price is likely to increase more. According to him, there would be an appreciation of between 15 and 20 per cent next year in the gold price which is expected to be around $1,774 next year. Gold prices reached their highest ever mark in September 2011 when an ounce of it traded at $1,895.
“The protests in Hong Kong show no sign of ending soon, and that has been considered by investors as one of the international uncertainties. In addition, both China and India have faced inflation problems. Whenever there is worry over inflation, investors like to buy gold to hedge against the risks of inflation and hence drive the gold price to rise further,” Lo said.
The price of gold is expected to be between $1,580 and $1,620 by the end of 2020, a gain of 10 per cent, according to Joshua Rotbart, founder and managing director of Hong Kong-based J. Rotbart & Co.
“We are bullish on gold. We believe some of the [same] financial concerns will be playing out next year too, as well as the continued tensions between the US and China. On top of that, gold is becoming more scarce, and production and mining are getting more costly,” he said.
(Adapted from SCMP.com)