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Gold could ‘sky-rocket’ on global worries

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Gold hit a five-month high on Monday as investors took refuge in safe-haven assets in the wake of rising geopolitical tensions over North Korea.

Spot gold was up 0.3 per cent at $US1288.50 ($A1697) per ounce in early morning trading in Europe, after hitting its highest since early November at $1295.42 earlier in the session.

The stolen bullion is worth $70,000. The stolen bullion is worth $70,000. Photo: Phil Carrick

Bullion is up 13 per cent this year as investors seek a haven partly because of the unpredictability of President Donald Trump’s political and economic policies.

The U.S. bombed Syria and Islamic State positions in a remote area of Afghanistan this month, and tension ratcheted up at the weekend after Trump was said to be willing to consider “kinetic” military action, including a sudden strike on North Korea, after a ballistic missile launch by the country failed.

“Gold will likely retain a measure of strength heading into the French elections in about one week’s time, while ongoing tensions in North Korea should also keep the markets rather nervous,” said INTL FCStone analyst Edward Meir.

With the first round of France’s presidential election on April 23, an unpredictable outcome is pushing some pollsters to calculate the most extreme runoff scenarios after Trump’s surprising U.S. presidential win in November and Britain’s unexpected exit from the European Union in July.

The bullish sentiment in gold was underscored by data showing speculators increased their net long positions for a fourth straight week to April 11.

New York-listed SPDR Gold Shares ETF , the world’s biggest gold-backed exchange-traded fund, said its holdings rose more than six tonnes on Thursday, the biggest one-day inflow in a month.

“Gold is trading with an upward bias with the $1,300 level just in sight… We expect any dips in prices to be eagerly sought by traders,” said Jeffrey Halley, a senior market analyst at OANDA.

Jason Schenker, president and founder of Prestige Economics agreed saying: “Gold is going higher here. We see a gradually weakening dollar on trend. Although we expect two more rate hikes this year — September, December — and four rate hikes next year, what we also think is that a lot of that’s priced in.”

“If we get weak 1Q GDP numbers, equities are going to take a big hit, the dollar is going to take a big hit and gold is going to sky-rocket,” he said.

Others are not as bullish. Gold may decline this year as the Federal Reserve boosts interest rates, inflation remains contained and geopolitical risks ease, according to Pictet Wealth Management, which flagged a possible retreat toward $1,100. Goldman Sachs Group Inc. is targeting $1,200, $1,200 and $1,250 in its three, six and 12-month outlook for gold, an April 12 report showed.

Bloomberg, Reuters

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