By John McDonald
Unlike the stock market, which makes a certain subset of analysts and investors nervous when the numbers get too high, gold values are surging and few expect them to fall in the near future, if at all. Thanks to wide-ranging uncertainty about the United States’ trade policies, fear that the stock market is flying a little too close to the sun, and ongoing controversy over just what the Fed’s predicted July interest rate cut will really do for the national economy, gold’s “power as a safety trade is not waning, but could actually be set to spike,” as JC O’Hara, chief market technician at MKM Partners, described it.
O’Hara told CNBC in mid-June, “I think this short-term positive momentum really caught a lot of investors off-guard.” That might sound negative, but in reality, it is positive for investors for the foresight to see that gold is still positioned to rise both short- and long-term. He went on to predict gold might exceed certain prices that have been stumbling blocks for value over the past five years. “We get to that level, and I think investors will come running back into gold,” he said. “We’d be buyers of a breakout, here.”
Even investors who do not usually buy gold as an investment are saying the precious metal is prime for purchase “for protection purposes.” Strategic Wealth Partners CEO Mark Tepper, whose company does not currently hold the metal for an investment, said, “I do think it’s great to own as a calamity hedge.”
Toward the end of June, the gold market certainly seemed to be holding both analysts’ words to truth. Gold prices exceeded previous price highs and crossed $1,400 an ounce, something that has not happened since September 2013. The Federal Reserve’s ongoing reluctance to cut interest rates has also bolstered the market, since many investors think that cut must come at the July 2019 meeting.
“This (US-Iran tension) has likely stirred up investors’ appetite for [gold], adding to the uptrend in gold price that started in early May, even as the US Federal Reserve turns increasingly dovish and the US-China trade tensions prolong," pointed out Eun-Young Lee, an analyst at DBS Bank. The World Gold Council also noted demand from central banks remains strong, up 7 percent from Q1 2019 and already far exceeding 2018’s 4 percent demand.
Most analysts agree that if the dollar remains relatively weak and tensions in the Middle East continue, gold will remain on its upward climb. “Momentum is positive for the next half of the year,” said Mumbai-based Jigar Trivedi, an commodities analyst at Anand Rathi Shares & Stock Brokers. He added, “The way prices have risen, there could be a technical profit-booking, but the undertone is positive.
Singaporean Heng Koon How, head of markets strategy at United Overseas Bank, agreed. “We maintain our…bullish call for gold, and it looks like our mid-2020 target of $1,450 might be reached much sooner,” he said.