Will gold continue to shine amid trade war, Fed rate cut?

Gold prices are likely to gain from a persistent fear about the impact of trade wars on the global economy and rising expectations of an interest rate cut by the US Federal Reserve, according to analysts.

The spot gold jumped one percent to $1,345.70 an ounce on Friday to its highest level since April 2018, but was down 0.7 percent at $1,330.46 per ounce on Monday morning.

“The gains we’ve seen in gold over the last week have been down to investors seeking the perceived safety of gold in response to softer US jobs data out at the end of last week and dampening expectations that rates will rise further,” Edward Bell, director of commodities research at Dubai-based Emirates NBD, told Argaam.

“Gold stands to benefit so long as there is uncertainty over whether the US will impose tariffs on trade partners which could result in slower global growth, hitting valuations for equities,” he added.

Emirates NBD estimated Q2 average gold price stands at $1,350 per ounce, while its 2019 annual forecast is at $1,345 per ounce.

In a report issued last week, Ole Hansen, head of commodity strategy at Saxo Bank said that the bank maintains the view that global growth momentum is slowing and likely to worsen further before renewed policy panic from global central banks will help to stabilize the outlook.

“On that basis, we believe that gold, following a period of consolidation, could eventually challenge resistance with a break signaling a potential $100 extension to the upside towards $1,480 per ounce, the 50 percent correction of the 2011-15 sell-off.”

In a statement on Sunday, the International Monetary Fund managing director Christine Lagarde called upon the US and China to de-escalate their trade war, warning it as “the biggest risk to global economic growth”.

After a breakdown in trade talks last month, the Trump administration increased tariffs on Chinese goods, bringing the total value of imports subject to 25 percent duties to $250 billion.

China retaliated each time since the first tranche of US tariffs took effect last July, recently increasing duties on $60 billion of American imports.

To contact the writer, email Parag Deulgaonkar at parag.d@argaamplus.com