Last Updated : Jan 04, 2019 12:38 PM IST | Source:

Gold nears $1300-level for the first time since mid-2018. Time for the metal to shine finally?

There are expectations that a three-year rate-hiking cycle in the United States has come to a close. This may benefit the non-yielding bullion.

Moneycontrol News @moneycontrolcom

Gold is nearly touching $1300 an ounce for the first time since mid-2018 on the back of fears of a global economic slowdown that gripped global markets, fuelling demand for safe-haven bullion. The price of the yellow metal on January 4 rallied for the third consecutive week.

Spot gold gained 0.3 percent to $1,297.20 per ounce by 0112 GMT, having earlier touched its highest since mid-June at $1,298.34. The metal has risen more than 1 percent so far this week.

The demand for the metal went up as the global markets were on edge after dire US economic data slammed Wall Street and pushed investors to bet the Federal Reserve could reverse its policy tightening before the end of this year. Weak manufacturing sector numbers published by Europe and China also added pressure on the stock markets that triggered demand for the yellow metal.

Amid the backdrop of worries over slowing global economic, Apple's sales warning on a decline in revenue sent shock waves to financial markets, giving rise to uncertainty. Since gold is traditionally considered a safe investment during times of uncertainty, investors rushed to buy the metal.

A weak US dollar also pushed the demand for the precious metal by making it cheaper for holders of other currencies.

"The equity markets turned around. Secondly, the dollar index got very strong; it is testing the 97 level again. Both of these factors are putting pressure on the price of gold," said Walter Pehowich, Executive Vice President of investment services at Dillon Gage Metals told Reuters.
If it is the yellow metal's time to shine finally or not depends on the global economic growth, dollar and stocks and yields in the global markets. "If the fourth quarter theme of lower dollar, stocks and yields carries on, gold is likely to break higher and set its sight on the previous high around $1,380," Saxo Bank analyst Ole Hansen told Reuters.

Gold is overbought on most measures and needs to consolidate but with the speculative long still building, the market will be looking for $1,300 sooner than expected, Hansen added.

Markets are now awaiting views from Federal Reserve Chairman Jerome Powell on the US economic outlook and hints about interest rates in 2019. According to media reports, there are expectations that a three-year rate-hiking cycle in the United States has come to a close. This may benefit the non-yielding bullion.

"I think gold will have a very good 2019. The dollar will continue to weaken. Even though it's up today, it is just an aberration," Pehowich said.

First Published on Jan 4, 2019 12:38 pm
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