Gold may gain up to 10 per cent this year as geopolitical risks, lower US interest rates push price to US$1,700, say analysts
- Heightened tension in the Middle East, and the continuing US-China trade war will reinforce gold’s role as a safe haven, driving its price up
- The precious metal hit a seven-year high of US$1,574.37 an ounce on Tuesday, before retreating as the US-Iran standoff appeared to simmer down
The tentative easing of tensions in the Middle East in the second half of last week caused the price of gold to pull back from a seven-year high. But analysts see further gains in store for the yellow metal this year, with US$1,700 per ounce achievable on the back of sustained geopolitical risks and lower US interest rates.
On Friday spot gold was quoted at US$1,547.51 per ounce, having lost almost 2 per cent over the previous three days from a peak of US$1,574.37 per ounce on Tuesday.
Fuelling gold’s spike early last week was a rush to the traditional safe haven asset after Iran fired at least a dozen missiles at military bases in Iraq that hosted American personnel, in retaliation for the US’ assassination of its top general, Qassem Soleimani, on January 3.
But gold’s ascent lost steam when President Trump appeared to seek de-escalation after the strike, declaring later that Washington would respond to the missile strike with economic sanctions and that the “US is ready to embrace peace”.
Year-to-date, gold is up about 2 per cent. The US$1,700 per ounce forecast would mean a near 10 per cent rally.
ING recently revised up its 2020 forecast for gold to US$1,500-1650 per ounce from US$1,500 per ounce, in light of the heightened geopolitical risks from the Middle East. Warren Patterson, ING’s head of commodities strategy in London, said the Gulf attacks at the start of the year will continue to weigh on investors’ minds.
“While it appears that there has been something of an easing in tensions, we believe market participants are unlikely to forget about these risks any time soon,” said Patterson.