InfoQuest (December 16, 2019) - Gold prices in 2020 still depend on the implications of the trade war as how this trade row will end remains unclear in the long run, said Ms. Pawan Nawawattanasab, CEO of YLG Bullion and Futures Co., Ltd. If China and the United States can reach an agreement, gold selling may follow, so it is necessary to conduct regular situation assessment. YLG expects the Federal Reserve will stick to the loose monetary stance, which will keep the gold market under spotlights.
If gold prices can stabilize above 1,445-1,390 U.S. dollars / ounce or 20,600-19,850 Thai baht / baht of gold in 2020, then there is a chance to hit the highest level of 2019 of 1,557-1,535 U.S. dollars/ ounce or 22,250-21,900 Thai baht / baht of gold. Moreover, if gold prices can change within this range, there is a chance to reach the highest point during March-April 2013 of 1,603-1,616 U.S. dollars/ ounce or 22,900-23,100 Thai baht / baht of gold.
"If China-U.S. trade talks make encouraging progress, the gold market will consider it an indicator that the Federal Reserve will tighten its monetary stance. This will put pressure on gold prices. However, if China-U.S. trade talks get nowhere, this trade row will act as a supporting factor for prices of gold as a type of safe-haven asset. At the same time, due to this, central banks around the world will also stick to a loose monetary stance, which will continue to shore up gold prices in 2020," said Ms. Pawan.
Ms. Pawan added that the trade war between China and the United States has driven global gold prices up by 15 percent, and Thailand's domestic gold return rate by 7.4 percent in 2019. As this protracted trade war has led to a global economic slowdown and raised concerns over a possible recession for the U.S. economy, people will have a stronger urge to buy safe assets such as gold. In the meanwhile, the main blame for the shift of worldwide central banks towards a loose monetary stance should also be put on this trade war.
Alongside that, in the wake of the trade war, more capital has flowed to gold, reflected in the increase in gold holdings in global ETFs and speculative interest of investors in the Comex futures market. At the same time, many central banks around the world have increased the proportion of gold in their international reserve holding portfolios.
More recently, China and the United States reached a trade agreement in the first-phase negotiations under which the United States suspended to impose a 15 percent tariff on 156 billion U.S. dollars worth of Chinese goods scheduled to be effective on December 15. However, gold prices experience no sharp drop since the announcement of the above information, partly because the market has already anticipated what is happening now, and the United States will continue to levy a 25 percent tax on 250 billion U.S. dollars worth of Chinese goods. Although it has reduced the previous tariff on about 120 billion U.S. dollars worth of Chinese goods to 7.5 percent, most import taxes remain unchanged. Given this, the trade agreement reached between China and the United States in the first-phase negotiations is not enough to make the market confident about the future situation, so some investors still hold gold as safe-haven asset to prevent risks.
Source: InfoQuest, by Rachada Kongkhunthian/Sasithorn, translated by Xinhua Silk Road.
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