The price of gold has been rising as a global bond rally and protracted trade war between the United States and China, combined with a slow growing economy in Europe, are spending a chill down the spine of investors.
In times of economic uncertainties and challenging market environment, investors tend to move their investment from risker assets to safe heaven like Gold and bonds, but bonds yields, which move inversely with prices, have been turning negative.
Such gyrations are a boon for the glittering commodity as the prices of gold have rallied 19 percent so far this year to $1,519.60 although the bullion was down 0.45 percent in the spot market as at 9 am
GMT+1 Friday. Investors see the precious metal as another haven when equities, some currencies, or other assets feel risky.
Like oil, the price of gold reacts to movement in dollars, and the price of the precious metal go up or spikes whenever the dollar weakens.
The global macroeconomic uncertainties could push the price of the commodity to around $1,700.
Around 15 trillion of global government debt now trades with negative yields, and what this means is that government is going to be paid for borrowing. Germany, which is used to have the most attractive yields among Europen countries, has fallen into the negative territory.
To further stoke investor fear is a recent announcement by President Donald Trump that there will be additional tariff on Chinese goods. And China retaliated by weakening its currency. President Trump accused Beijing of currency manipulation.
According to the World Gold Council, central banks purchased nearly 70 percent more gold during the first quarter of the year than they did during the previous year’s corresponding period.
That’s the most they bought since the first quarter of 2013.
For Eurosun’s Rovina Valley project in Romania–the largest in- development gold mine in Europe–the de-dollarization drive will been a boon for the 10 million ounces of gold equivalent they’re hoping to get out of the ground in the simple geography of Romania’s prolific Tethyan Gold Belt.
Bank of America Merrill Lynch, on the other hand, expects bullion price to near $2,000 within two years, beating the all-time high of $1,921.17 established in 2011.
“We’re now going from trade wars almost into currency wars,” Whitney George, president of Sprott Inc., a precious metals-focused fund told Bloomberg. “Gold is a currency, but it’s nobody’s obligation, so it will stand tallest when everyone else is trying to debase their currency to be competitive globally.”
Slowing global growth has set countries on the edge as governments are trying to devalue their currencies and cut rates to stimulate economic growth.
Bloomberg survey shows 69 percent of traders and analysts are bullish on gold.
