Jigar Trivedi
Comex Gold went up by 2.2 percent in the week gone by and 3.23 percent in December. US President Donald Trump said the United States and China would “very shortly” sign their Phase 1 trade pact, but the markets waited patiently for further details of the agreement.
The safe-haven demand increased as China’s top law-making body criticised the Defence Bill that Washington passed on December 9 as “interference”.
New orders for US-made capital goods barely rose in November (0.0 percent versus 0.1 percent forecast and 0.3 percent a month ago) suggesting business investment will probably remain a drag on economic growth in the fourth quarter. New home sales for November in the US disappointed as it grew at 7,19,000 versus 7,34,000 forecast & total sales of 7,10,000 in October.
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Russia’s finance ministry said country’s Gold production rose 19.5 percent in the first eight months of 2019 to 232.16 tonnes from 194.23 tonnes a year earlier. He further added that Russia could consider investing part of its National Wealth Fund in Gold, adding that he sees investment in the precious metal as more sustainable in the long-term than in financial assets.
Haven demand further improved as Trump dismissed North Korea’s warning of a “Christmas gift,” saying the United States would “deal with it very successfully,” amid concerns that Pyongyang might be preparing a long-range missile test.
The world’s largest Gold-backed exchange-traded fund, SPDR Gold Trust, said its holdings rose to 893.25 tonnes on Thursday from 885.93 tonnes on last Friday.
The yellow metal is on its course to close 2019 with handsome 17.8 percent return and we believe 2020 will also be as fruitful as 2019 has been so far. Long overdue trade worries, political risk in the US (election) & UK (Brexit), Fed stance, dwindling economies, central bank buying and investment buying all will provide fuel to the rally.
The week will also be holiday-shortened due to new-year celebrations so volumes may get thin. However, sentiment will be positive due to a rise in geopolitical risk between the US and North Korea. The safe-haven demand has improved. Traders are also cautious due to uncertainty related to signing formalities of the trade pact between the US & China. Hence we expect the yellow metal to stay upbeat in the 1st week of 2020 also.
(The author is Fundamental Research Analyst – Commodities at Anand Rathi Share and Stock Brokers Limited)
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Source: Money Control
