Gold price has room to go lower


GOLD could decline lower and test US$1,720 (RM7,052) a troy oz price level as investors continue to take “risk on” trades at the expense of safe havens on expectation economies and cyclicals will enter a recovery phase due to the availability of Covid-19 vaccines soon.

Malacca Securities Sdn Bhd head of research Loui Low said gold had rallied earlier due to its safe haven status and amid the uncertainties in the markets.

“Market players are looking for recovering themes following several vaccines news, hence, selling their gold for investment into riskier assets such as equity.

“Gold is moving into a consolidation phase and based on technical analysis point of view, gold price should stay within the range of US$1,720 to US$ 1,800 moving forward,” he told The Malaysian Reserve with a downside bias for the price range higher at this juncture.

As at 6.30pm yesterday, the precious metal was retracing earlier losses and trading US$19 higher at US$1796 an oz.

Gold hit a high of US$2,075 in early August and has since reversed its price trajectory.

Areca Capital Sdn Bhd CEO and ED Danny Wong said gold is a good hedge during periods of crisis and recession.

“With the positive development of Covid-19 vaccine, the market is pricing in a recovery in global growth over the next two to three years. Gold may not be the mainstream investment during recovery time,” he said.

Last week, Prime Minister Tan Sri Muhyiddin Yassin announced Malaysia has signed an agreement to purchase 12.8 million doses of Pfizer Inc’s Covid-19 vaccine to meet the immunisation needs of 20% or 6.4 million people in this country.

The first delivery of a million doses of the vaccine will be made in the first quarter (1Q) of next year as a result of the initial purchase agreement signed by the government through the Ministry of Health (MoH) on Nov 24.

“Through this agreement as well, Pfizer promises delivery of one million doses in 1Q of 2021, followed by 1.7 million doses in the 2Q, 5.8 million doses in the 3Q and subsequently 4.3 million doses in the 4Q,” he said in a virtual press conference in Putrajaya.

Aberdeen Standard Investments (M) Sdn Bhd country head Gerald Ambrose said gold price started to correct about the time a Covid-19 vaccine was announced.

“Maybe the overall market thought was that a vaccine means recovery, which leads to less stimulus and less money printing by the US, UK, European Union and Japan central banks. Eventually, recovery means no more low-interest-rates.

“What is also noticeable is the simultaneous rise of bitcoin and other cryptocurrencies which is more ‘millennial’, while gold more ‘old-timer’, but the rationale is the same; you buy both assets because central banks are messing with fiat (paper) money,” he said.

Read our earlier report

News on discovery of COVID-19 vaccine causes drastic drop in gold price