Traders point to speculative opportunity for gold buyers

Traders point to speculative opportunity for gold buyers

Gold bars on display at a Hua Seng Heng shop. On top of the coronavirus epidemic, US politics is set to influence gold price movements.
Gold bars on display at a Hua Seng Heng shop. On top of the coronavirus epidemic, US politics is set to influence gold price movements.

As local gold prices trend upward amid growing appetite for risk hedging, investors could either opt to buy for long-term holding or invest based on short-term speculation, traders say.

Gold prices this week could see a correction after a series of preventive and aid measures in response to the coronavirus outbreak, said Tanarat Pasawongse, chief executive of Hua Seng Heng Gold Futures.

"People who want to speculate are recommended to buy at a weaker price threshold, near US$1,540-1,545 and $1,510," Mr Tanarat said.

The resistant price threshold is likely to hover around $1,590-1,600 during this period, and for investors who want to buy gold and hold on for the long term, the prices at this time are not expensive, he said.

On top of the virus pandemic, other factors affecting gold price movements going forward are US political developments and the 2020 presidential election, with investors closely monitoring economic stimulus measures and political campaigns, Mr Tanarat said.

"The latest public opinion polls show that the incumbent, President Donald Trump, still has mostly favourable support among Americans," he said. "This indicates a greater likelihood that his economic policies will continue."

A continuous gold price rally is possible given that China's first-quarter GDP growth is subdued, Mr Tanarat said.

The overall scenario will induce a risk-off investment appetite among investors, he said.

Kritcharat Hirunyasiri, chairman of MTS Gold Futures, said the weak baht is among factors prompting local gold prices to spike, with investors gradually embarking on a profit-taking strategy.

For those who want to speculate with physical gold on a small budget, Mr Kritcharat suggests using gold futures, a derivative product based on an underlying price of gold, as there is minimum leverage to help gear up investment returns.

If investors were to allocate 100,000 baht for gold speculation, they could purchase about four baht-weight in gold. Alternatively, investors could buy 8-10 baht-weight via gold futures and obtain a higher return from this investment leverage tool, given that the local gold market has an upward price outlook.

"With the same amount of money, people can buy more through gold futures," Mr Kritcharat said. "For newcomers who are not familiar with gold futures, the suggested leverage portion should be one of 10 times the price leverage to avoid margin calls."

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