Gold price can rally further to test US$2,000 in near-term


The price of gold has the potential to rally further to US$2,000 an ounce in the near-term, fresh off reaching its all-time high US$1,980 an ounce recently, as the precious metal continues to thrive on weakening US dollar, as well as uncertainties arising from the COVID-19 pandemic and geopolitical tensions.

OCBC Bank economist, Howie Lee said US$2,000 an ounce is a likely target, with the catalyst for the uptick in the gold price has been the recent collapse in the US dollar.

“With further fiscal stimulus coming onstream in the United States, gold is rising on inflationary fears on top of the weakening greenback,” he told Bernama.

Lee said what we are ultimately seeing is asset inflation whereby the barbell strategy is the current theme among investors, where they continue to plough excess liquidity into risky assets, but also simultaneously purchase plenty of hedging on gold to guard against heightened risks of a black-swan downside.

Gold gains momentum after Fed’s renewed pledge for stimulus

OANDA New York senior market analyst, Edward Moya said gold rally fizzles on following a dovish statement by US Federal Reserve chairman Jerome Powell, who renewed the US central bank’s pledge for stimulus to support the economy in response to the pandemic.

He said gold would continue to rise higher after the Fed’s promise to keep the stimulus coming. 

“Gold fell a couple of dollars shy of the US$2,000 level and traders locked-in profits after Powell’s comment that fiscal policy is essential.  The gold stimulus trade remains intact but could see some disappointment if Republicans and Democrats do not have a breakthrough with the COVID-19 relief bill over the next few days. 

“The Fed’s backstop is not going away, but if Congress botches the size and timing of the relief bill, gold could consolidate before breaking beyond the US$2,000 level,” he added.

Jewellers strike gold

Meanwhile, homegrown jewellery brand — Habib Jewels Sdn Bhd sees the uptrend in gold price would continue to bring positive sentiment towards consumer buying behaviour.

General manager Mohd Zaruddin Mahmud said the company still received an overwhelming number of customers buying both gold jewellery and gold bar despite the soaring price.

“Looking at the state of the world economy that does not seem to recover in a short time, I feel the price will remain high until the COVID-19 vaccine is developed.

“As long as the vaccine is not found and many countries still have to close their businesses, the price of gold will keep on increasing due to very high demand as investors turn to safe-haven,” he added.

Lack of liquidity in local gold futures

Phillip Futures Sdn Bhd dealer, Ong Su Ling said gold futures contract on Bursa Malaysia Derivatives remained unchanged this week despite the positive movement in US COMEX gold.

Ong said the lack of liquidity (trading volume) due to fewer players in Bursa gold futures market is one of the possible reasons why local gold futures trading ended with no volume as well as the possibility that many investors are more focused on USD gold. 

Meanwhile, Ong said gold prices would continue to find support from the ongoing US-China tensions, as the two-year-old tariff war between the world’s two largest economies has caused global trade to decline, further polishing the precious metal’s safe-haven shine.