Gold could see further rise on geopolitics, dollar weakness

Gold prices are expected to rise further as investors continue to view it as a safe haven amid rising geopolitical tensions and the recent pull-back in the US dollar.

“Gold could rise to $1400,” Pradeep Unni, senior analyst at Richcomm Global Services in Dubai, told Argaam.

The precious metal jumped to a nine-month high on Tuesday at $1325 on news of a North Korea ballistic missile launch over Japan in response to US and South Korean military drills. This was its highest level since the US presidential elections in early November.

The price has however dropped since then as fears receded somewhat. On Wednesday, spot gold was down to $1309.62 per ounce.

“Between here and the next major level at $1337, there is no crucial resistance to watch out for. For now, there is no reason to believe we will see this rally let up, with a bullish view in play unless the price falls below $1314,” Joshua Mahony, market analyst at IG, said in a note.

In addition to the geopolitical tensions, the persistent weakness in dollar is also driving investors to look for safety in the precious metal.

According to Reuters data, the dollar index, a measure of the buck against six developed market counterparts, has dropped 1.3 per cent in August, and has shed 9.4 per cent since the end of February.

“Also, as most stock exchanges are at all-time highs, investors looking to diversify into commodities are looking at gold,” said Unni.

Write to Brinda Darasha at brinda.d@argaamplus.com