Gold shines again

by NUR HANANI AZMAN / pic by TMR FILE

ANALYSTS anticipate gold to trade at new highs of US$2,000 (RM8,000) in the early part of this year as the US dollar is expected to weaken substantially through 2021.

Oanda Corp Asia-Pacific senior market analyst Jeffrey Halley said the continuance of ultra-low interest rates in the US and the dollar’s weakening due to the US’ trade deficit will push gold to new highs.

The price of gold traced out a cyclical low at US$1,760 an oz at the end of November before jumping to break the US$1,900-psychological mark recently on a combination of stop-loss buyers and risk aversion ahead of the Georgia Senate vote today in the US.

“Gold could well trade near US$2,000 an oz over the next two sessions if the Georgia vote results in a Democrat clean sweep, or an election too close to call delaying final results for a few days,” Halley told The Malaysian Reserve yesterday. At the time of writing, the gold was priced at US$1,947 an oz.

Halley said gold, and to a lesser extent, silver, have always been safe-haven assets and a store of wealth throughout human history, and this has not changed.

Thus, he said the classification of gold as the most safe-haven asset is a little misleading.

“If you are comparing them to cryptos then the comparison is incorrect. Gold is an investable asset. In contrast, cryptos may be tradeable, but are not yet investable assets by any reach of the imagination. Yesterday’s intraday range on Bitcoin proves that,” he added.

AxiCorp Financial Services Pte Ltd chief global market strategist Stephen Innes said gold is holding on to its early sensational gains despite the US dollar attracting safe-haven demand.

“More favourably for the currency of last resort is that inflation expectations are bubbling over as the vaccine rollout is providing a sizeable anticipated inflationary bounce to the economic recovery this year.

“The bullish seasonality for gold in January has been one of the strongest across precious metals and the Group of 10 space over the past five years,” he said in his market analysis report yesterday.

Innes expects the market to quickly factor in the price change over the week, with room for discussion after the seasonal move higher is reached.

He added that other factors to consider are the Georgia Senate elections runoffs and a potentially increased fiscal spending outlook for the US.

According to RHB Retail Research, the precious metal is poised to challenge the overhead resistance level, marked at US$1,950 and US$1,966.10.

“We expect profit-taking activities or minor corrections ahead, as the commodity trends higher. As long as it trades above the moving averages, we will maintain our positive trading bias. We recommend traders to hold long positions,” the research outfit noted.

From a technical perspective, it noted downside support is marked at the US$1,900 followed by US$1,860. The immediate resistance is pegged at the US$1,950 followed by Nov 9’s high of US$1,966.