Gold prices seen supported by trade tensions, Brexit

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GOLD PRICES are expected to remain at about $1,450 per ounce (oz) in the next three to six months into 2020, supported by the precious metal’s safe-haven value in the face of the US-China trade war, Brexit, and unrest in various parts of the world, including major gold market Hong Kong, Fitch Solutions Macro Research said in its Commodity Price Forecast.

“We maintain our gold price forecast of $1,450 per ounce (oz) for 2020, and expect prices to average around current spot levels next year. We are also neutral towards gold prices in the next three to six months, from both technical as well as fundamental perspectives,” Fitch Solutions said in the report published Nov. 29. The price projection is 5% higher year-on-year.

Fitch Solutions said central banks are expected to slow down in reducing interest rates, making gold more attractive “due to the fact that growth could be starting to stabilize.” The firm expects the Federal Reserve to hold off on rate cuts throughout 2020, after effecting 75 basis points worth of cuts in 2019.

In the long term, Fitch Solutions expects a mild appreciation to $1,525 by 2023, backed by cyclical pressures and imbalances, greater demand for gold by central banks, and political uncertainty across countries.

“Going forward, we expect trade developments and monetary policy to continue to be the main drivers of risk sentiment,” Fitch Solutions said.

With an improved trade environment between the US and China and tame inflation, gold could become less attractive. but if these do not take place, Fitch Solutions expects a stronger shift to gold.

“If we see a full yield curve inversion and a US equity market crash, this would naturally lead to a sharp rise in gold prices. Finally, we would change our long-term outlook of mild appreciation in gold prices if there is a technical break below $1,350 per oz in the coming years,” it added.

Chamber of Mines of the Philippines (CoMP) Executive Director Ronald S. Recidoro said the organization has a similar scenario for gold prices in the coming years, noting support from trade tensions between the US and China, as well as scarcity factors.

“We concur with that assessment. I think there is consensus that the gold price is general on the rise, owing to… US and China,” Mr. Recidoro said when asked for comment.

“Apart from that is scarcity because there has been a global slowdown in exploration, and so supply is becoming limited and the easily-mined deposits have been discovered and extracted, so it’s getting harder and harder to mine. We think in the long term gold will become more attractive as an asset,” he added. — Vincent Mariel P. Galang