Gold-backed exchange traded funds, such as the SPDR Gold Shares (NYSEArca: GLD) and SPDR Gold MiniShares (NYSEArca: GLDM), are trading modestly higher this year, but more gains could be on the way if bullion can conquer the $1,300 level.
Against the current backdrop of the U.S. trade war with China, and the fear and uncertainty that accompany the rampant volatility and the worst May selloff for stocks in 50 years now, gold prices will continue to rise this year, according to one financial executive.
Boosting the case for gold is that the Federal Reserve recently alluded to no more rate hikes for the rest of 2019 after initially forecasting two. The capital markets initially expected rates to remain steady after the central bank spoke in more dovish tones following the fourth and final rate hike for 2018 last December.
“’Buying the dips will define gold’s latest trading pattern as the precious metal heads towards $1,300 in the near-term, guided by a dovish Federal Reserve and an aversion to risk amid U.S.-China trade tensions, according to TD Securities,” reports Kitco News.
What’s Next for Gold?
While the first quarter of 2018 saw demand at just 984.2t, a 3-year low for the precious metal, gold demand in 2018 reached 4,345.1t, up from 4,159.9t in 2017 and in line with the five-year average of 4,347.5t.
Most of this growth was driven by substantial buying on the part of the central bank. Nine Central banks actively purchased gold bullion. Central bank net purchases totaled 145.5t in the first quarter of 2019, which was the strongest first quarter since 2013 (179.1t).
“Gold is set to improve and trend toward $1,300/oz. Lower rates, a flat curve and a growing likelihood of rising equity market vol are all factors helping gold … suggesting buying the dips may well be the order of the day in the precious space,” according to TD Securities.
Investors have looked to GLD as a quick and easy way to gain exposure to gold price movements as they hedge against market risks, help protect their purchasing power in times of inflationary pressures or capitalize on increasing demand from the emerging markets with a growing middle-income class.
“Continued dovishness from central banks and potential growth concerns amid renewed trade tensions should prompt money managers to grow their allocations to the yellow metal as data begins to deteriorate,” according to TD Securities.
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