Gold prices started the week edging up after it saw 4-month low last week due to positive signs on global economy, while US first quarter growth data to be released later this week will be under spotlight. As yellow metal is weighed on due to strong data from the US and China, gold remains pressured despite weak European manufacturing, however, Standard Chartered precious metals analyst Suki Cooper said the weakness in prices will end soon and gold prices will start increasing since Federal Reserve will likely hold interest rate hikes for a while. In the meantime, as central banks keep increasing their gold reserves, Asian demand for gold rises.
Gold prices increased on Monday after seeing the lowest level of the year last week due to strong US and Chinese economic data released recently. However, possibly better than expected US first quarter growth data to be released on Friday may weigh further on gold prices.
As of 15:12 GMT+3, spot gold was trading at $1,278.84 an ounce while dollar index was down to 97.33. US 10-year Treasury yield increased to 2.565.
IG Asia market strategist Jingyi Pan said on Bloomberg that safe haven demand was pressured by trade optimism, increasing equities and decrease in holdings of gold-backed exchange traded funds (ETFs) while adding optimistic expectations over company earnings to be released in the US this week increased risk sentiment.
On the contrary of negative expectations on gold prices, Standard Chartered’s precious metals analyst Suki Cooper said on CNBC that weakness in gold prices would come close to an end and they were expecting gold prices to start increasing in upcoming months. Cooper said Fed would likely hold interest rate hikes in 2019-2020 and prepare for economic downturn which would likely to be seen in 2021, while also saying depending on historical data that gold prices kept trading in a range for a while and then started increasing after Fed stopped hiking and even cut the rates. She added today’s situation was not so different than that. Cooper also said they expected gold prices to average $1,325 an ounce in the fourth quarter while forecasting average $1,375 in 2020.
In the meantime, according to World Gold Council data, central banks kept increasing their gold reserves by buying 90 tons of gold in the first two months of 2019 and comparing to 56 tons last year in the same season, this buying was the highest since 2008 financial crisis. It was underlined that main motivation of central banks to diversify their reserves was economic and geopolitical uncertainty. While China and Russia announced increase in their gold reserves, Commerzbank said Turkey and Kazakhstan were among those top buyers as well, according to IMF data. Moreover, according to Swiss Federal Customs Association data, Switzerland exported 55.3 tons of gold on total to China, Hong Kong and India in March however it is estimated to be higher considering exporters other than Switzerland.