Broker: Gold price poised to rebound

Broker: Gold price poised to rebound

Gold price is projected to rebound for the first time in three years if it breaks the $1,400 resistance, according to a broker.

GMI Edge said the gold price is likely to be on the rise after over three years if the conflict between the United States and China continues. Besides, central banks of emerging countries have started collecting gold as a reserve since late 2018.

Noppavee Bukkamana, regional director of GMI Edge, a company under the UK Investment Institution Group, said the demand for gold is rising due to concerns about trade wars which render gold an interesting investment asset.

The trade war between the US and China has escalated into a technology war, which rattles the global investment market and causes regression in various economic signs such as the production index (PMI) and gorss domestic product that starts to slow down, he said.

In addition, the weakening of US dollar yields benefits to the gold price. The occurrence of the inverted yield curve also indicates a risk of recession or future economic slowdown.

Recently, Federal Reserve chairman Jerome Powell said that there was a chance that the Fed would reduce the interest rate at least once this year and the Fed might consider employing the quantitative easing (QE) tool —  increasing the volume of money — if the economic situation was still uncertain.

In the past, a reduction in the interest rate and QE implementation resulted in a rapid rise of the gold price. “Since the end of 2018, there has been news that the governments of China, Russia, and the emerging markets have purchased such a large amount of gold as a reserve fund that the amounts of gold reserves of many countries hit record high in many years. This is a sign that the price of gold could rebound,” said Mr Noppavee.

According to the global chart, the price has bottomed out at $1,050 since the beginning of 2016. However, it was unable to rise through an important threshold of $1,400 although it already broke the level twice in the middle of 2016 and early 2018.

"If the coming price adjustment can push the gold price past $1,400, it will be able to make a major comeback for an upward trend in three years, he said.

“Investors must closely follow world economic news, especially the conflict between the United States and China which might lead to the establishment of tax and technology walls against each other and a highly volatile world economy if the conflict were prolonged. This fluctuation has a positive effect on the gold price, but once the situation returns to normal, it is possible that people will sell their gold,” Mr Noppavee concluded.

Do you like the content of this article?
COMMENT