SINGAPORE (July 16): The appeal of gold as a safe-haven asset has increased amid trade tensions and record number of new Covid-19 cases, says Phillip Futures analyst Avtar Sandu.
This was evidenced as the Comex GC August Gold futures settled virtually flat on July 15, above the US$1,800 ($2,501.08) mark, says Sandu, in a note dated July 16.
Gold prices stood firm for most of Wednesday due to weakness in the US Dollar, though its advances were tempered by the renewed strength in Wall Street equities.
Optimism that the European Union (EU) would pass a huge recovery plan by Friday also sustained gold prices.
However, gold prices remain steady on the back of a potential second wave of Covid-19 cases in the US and around the world. The worsening of the pandemic may cause international borders to remain closed, and lockdowns kept in place, which will slow global economic growth.
The benchmark Comex GC Aug20 contract opened this morning at just 40 US cents after closing at US$1813.80 an ounce last night. The Tocom benchmark JAU June21 Gold Futures however opened 6,235 yen ($80.95) in early Asian trade after closing up +1 Yen at 6233 yen/gram in overnight trading.
“The bull’s case for gold would remand intact with real rates low and suppressed and which would be able to sustain the high price of gold. But with prices at yearly highs, buying the dips probably works out best for most traders as a trading strategy,” says Sandu.
“Short term pullbacks present excellent buying opportunities for traders. Patience pays off more often than not,” he adds.
Gold continues to remain a safe-haven as currencies are being devalued by massive stimulus programmes introduced by central banks and governments around the world.
Sandu says technical indicators on the daily charts are sending mixed signals. The 14-day RSI is much higher the mid 50 level but is tapering off, suggesting a market that is consolidating.
The MACD (moving average convergence divergence) index has crossed with a slightly downward sloping trajectory that is not steep.
