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Gold’s rally meets JPMorgan warning as the curtain falls on 2019

By Ranjeetha Pakiam

Gold pushed deeper into the $1,500s in a concerted year-end rally as the dollar hit a six-month low. The jump came against a backdrop of record equity prices, easing trade tensions, and a warning from JPMorgan Asset Management that bullion may not offer sound portfolio protection.

Prices climbed for the sixth time in seven sessions, with the traditional haven set for the biggest annual gain since 2010. Gold is poised to close out a fifth quarter of gains, a feat that the commodity hasn’t managed since 2011. Exchange-traded fund holdings are rising.

Gold has found renewed favor this month as investors position their portfolios for 2020. The White House’s leading China hawk, trade adviser Peter Navarro, said a preliminary trade deal with Beijing is completed, potentially easing a source of tension. With global stocks near a record, and the Federal Reserve on alert to police any end-of-year funding squeeze, JPMorgan said some of gold’s strength may have come from investors seeking protection against a potential sell-off — something that it counseled against.

“People are starting to question how much further they have to run after that stellar 2019,” Hannah Anderson, a global market strategist at JPMorgan, told Bloomberg TV, referring to gains in equities and fixed income. “Some investors are starting to wonder if gold is going to be the safety for their portfolio. Personally, I think investors probably want to rethink that consideration.”

Spot gold climbed as much a 0.6 per cent to $1,524.23 an ounce, the highest level since Sept. 25, and traded at $1,523.18 at 6:32 a.m. in London, up 19 per cent this year. Silver, platinum and palladium have all advanced in 2019, too. The Bloomberg Dollar Spot Index is on course for the biggest quarterly loss since the first three months of 2018.

“There are very few certain environments in which gold does well, and it’s not necessarily the case that 2020 won’t be any of those,” Anderson said. “But if you look at the performance of gold in market downturns, it’s really a mixed bag, there’s no sure thing when it comes to gold.” She added: “In the next downturn, I do believe that bonds still could be defensive assets.”

JPMorgan has come out this month to make the case for a risk-on investment allocation for 2020 as the global economy gathers momentum in the wake of the recent slowdown. On Tuesday, data showed China’s manufacturing sector continued to expand output in December, adding to evidence that the world’s second-largest economy is stabilizing.

Source: Economic Times