Gold has been performing very well over the course of the year as global economic uncertainty and fears over a trade war have supported the precious metal – traditionally viewed as a safe haven investment by the investor community.
“I think the low point in growth is still in front of us, not behind us, and that may also lead to further gold appreciation,” said Ole Hansen, head of commodity strategy at Saxo Bank.
The price of gold could increase by up to 10-15 percent next year, towards $1,700 per ounce, Hansen said, adding that the commodity could keep going higher over the coming years.
Slowing economic growth has also had a positive impact on the gold price – a factor that may continue to play a role into next year.
Underlying uncertainties have “pushed people into the safe haven hedge of gold. Any uncertainty/bad news is generally bullish gold,” Ben Kilbey, battery metals/precious EMEA at S&P Global Platts told Al Arabiya English.
“The market remains reasonably bullish on gold going into next year; banks are dovish on rates, global economic signals are mixed,” he added.
Ongoing trade disputes between the world’s two largest economies, the US and China, throughout 2019 have added weight to fears over sluggish economic growth.
However, on Thursday Chinese Commerce Ministry spokesman Gao Feng announced that both parties have agreed to roll back tariffs on each other’s goods as part of an upcoming trade deal. Oil rebounded to above $62 per barrel on the news.
“With some hope of a tentative trade dispute resolution between the US/China, gold could succumb to selling-pressure as participants turn towards risker, more rewarding assets,” said Kilbey.
On the subject of a trade deal’s effects on the gold price Kilbey answered, “Likely negative, if it comes to fruition. People won’t want to store money in gold, they will likely want to move to riskier asset classes, those delivering a higher yield.”
Further compounding the prospects of gold is the intrinsic connection between the precious metal and US dollar prices.
As it is priced in USD, when the dollar gains value relative to other currencies, the price of gold tends to drop because it becomes more expensive in those other currencies.
“We mustn’t forget how interlinked gold is to currency trades, and if the dollar starts to catch a bid then gold could well come under pressure,” added Kilbey.
Hansen was bullish on gold in the future, despite potential pitfalls, however.
“It’s going to take time for the global growth to recover and during that period, I think there is a room for alternative investment such as gold,” he said.