Abu Dhabi, UAEThursday 24 October 2019

Gold rallies to almost six-year high on rising risks

The metal surged as fresh US sanctions on Iran added to uncertainty in global markets

A jeweller counts stacks of Sudanese bills at a shop in the capital Khartoum's gold market. The metal has surged to the highest level in almost six years. AFP
A jeweller counts stacks of Sudanese bills at a shop in the capital Khartoum's gold market. The metal has surged to the highest level in almost six years. AFP

Gold’s rally shows no signs of abating.

The metal surged to the highest level in almost six years as fresh US sanctions on Iran added to uncertainty in global markets, with investors also looking to the G-20 summit this weekend where Presidents Donald Trump and Xi Jinping are expected to meet to discuss trade. Another key event on traders’ watchlist is Federal Reserve Chairman Jerome Powell’s speech in New York later Tuesday, which will touch on monetary policy.

Bullion’s been on a tear this month as the dollar weakened after the Fed opened the door to an interest rate cut and other central banks also pivoted to a more dovish stance. Investors are taking note - pouring into exchange-traded funds backed by the precious metal and boosting net long positions in US gold futures and options. Morgan Stanley said gold is its top commodity pick on a six-month view as the uncertain macroeconomic outlook adds to its appeal.

“If lower US bond yields have historically signaled an economic downturn, then the absolute weight of global negative yielding bonds must be viewed as the harbinger of economic doom and gloom, which is perhaps the most precise and most convincing signal enveloping gold markets currently,” Stephen Innes, managing partner at Vanguard Markets, said in a note. “But with a significant rotation out of USD intensifying post-FOMC, it further adds to the glimmering gold market appeal,” he said, referring to the Federal Open Market Committee’s meeting last week.

“The global capital market’s mood is shaky due to the fear of the unknowns and it’s this uncertainty that will continue to provide the jet fuel for an already high-octane gold market,” Mr Innes added.

Spot gold climbed as much as 0.7 per cent to $1,428.88, the highest since August 2013, and traded at $1,425.42 at 9:37am in Singapore. A gauge of the US dollar hit a three-month low.

In other precious metals, silver rose 0.3 per cent, platinum added 0.1 per cent, and palladium advanced 0.3 per cent.

Updated: June 25, 2019 09:51 AM

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