Warren Buffet, weak dollar align to lift gold higher

Analysts believe gold can rise to US$3,000 region, potentially in 2021


GOLD rallied after billionaire Warren Buffet invested in gold and copper mining company, Barrick Gold Corp.

The precious metal was trading at near US$2,007 (RM8,394) a troy ounce at press time, up US$22, after hitting an intraday high of US$2,010 as investors reacted favourably to the news with gold-related counters on Bursa Malaysia gaining RM430 million in market value at yesterday’s close.

“I believe that Buffet’s positioning was another positive signal for gold, although I note he has bought a miner and not the actual metal. It was not, in itself, a singular reason for the rally,” said Jeffrey Halley, OANDA Corp’s senior market analyst for Asia Pacific.

Known as the “Oracle of Omaha”, Buffet’s Berkshire Hathaway Inc bought some 20.9 million shares (1.18% stake) in Barrick Gold, which drove a mad rush among investors. Barrick’s shares soared more than 10% upon Buffet’s investment. Buffet has in the past been critical of gold as a poor asset to store value as opposed to real estate and businesses investment.

The famed investor’s sudden positioning in a gold company put a frenzied spotlight on the gold market although Berkhire’s stake in Barrick is relatively low. Halley is positive that gold will likely continue to trade in an upward trajectory and hit US$3,000 in 2021.

“Gold remains a ‘Buy’ on any material dips in prices, but even at these levels, as a longer-term investment, it is appealing. I expect gold prices to move materially higher in the medium to longer term.

“They can also move higher in the near term, but investors should expect potentially emotional two-way volatility in prices. I believe gold can move to the US$3,000 region along with many other analysts, potentially in 2021,” added Halley.

Gold has inched to a fresh historic high of US$2,000 an ounce this month on the back of a weaker greenback, poor corporate results and low bond yields in the low interest-rate and currency debasement environment.

AxiCorp Financial Services Pte Ltd chief market strategist Stephen Innes said investors are looking closely at news from the US Federal Open Market Committee this week as they anticipate to hear mentions on average inflation targets, quantitative easing measures and yield curve control strategies that could further drive interest into bullion.

Innes said bullion has made an enduring comeback as investors sought safe-haven assets in a low return environment.

“The broader macro backdrop remains broadly unchanged, suggesting more stimulus will be needed to mend and repair the global economy severely fractured by the coronavirus. So, gold remains a viable diversifier asset in this type of environment.”

The rebound in gold prices over the week has encouraged fresh trading interest in gold-related counters on the local exchange like Poh Kong Holdings Bhd, Tomei Consolidated Bhd and MUI Properties Bhd (MUI Prop).

MUI Prop, which has a 40.7% stake in Australia-listed gold exploration company Nex Metals Explorations Ltd, saw its shares surge by 40% or 12 sen to end at 42 sen yesterday with 740.9 million shares traded.

Shares in well-known jeweller Tomei were up 21.1% to RM1.32 sen at close yesterday, while Poh Kong rose by 18.9% or 18 sen to RM1.13 sen.

Niche Capital Emas Holdings Bhd rose by 21.1% to 34.5 sen, while investors also bought into Sabah-based Bahvest Resources Bhd, which diversified its business into gold mining from the fishery business, causing its shares to add 16.2% to close at 61 sen yesterday.