Gold Nears Six-Week High on Caution Over Economy, Trade
December 23 2019 - 10:32AM
Dow Jones News
By Joe Wallace
Gold prices are trading close to their highest level in six
weeks, as investors remain cautious about the world economy and
geopolitics despite record highs in the U.S. stock market.
Gold futures rose 0.3% to $1,485.60 a troy ounce on Monday in
New York, extending their advance in December to 1.4%. The haven
metal is on course to rise 16% over the course of 2019, which would
be its biggest one-year rally since 2010.
"The fact that investors are still holding a decent chunk of
gold gives you a good feeling as to how they are literally hedging
their bets," said Altaf Kassam, head of investment strategy for
State Street Global Advisors in Europe, the Middle East and Africa.
"Gold is definitely not looking like a bad place to store some
value or have a hedge."
Gold prices have kept climbing in recent weeks even though
improving economic data and President Trump's provisional trade
deal with China have pushed U.S. stocks to a series of all-time
highs. The yield on 10-year U.S. Treasury notes has also risen,
from 1.782% at the start of December to 1.916% Monday. Higher bond
yields typically make gold, which pays no interest, less attractive
for investors to own.
Gold's resilience shows that the limited trade pact -- which
Washington and Beijing haven't so far signed -- hasn't dispelled
concerns about the outlook for global growth. China's Finance
Ministry said Monday that Beijing would cut import tariffs on a
range of goods in 2020, as the two sides attempt to complete their
so-called phase-one agreement.
"Worries about the state of geopolitics and the world in general
haven't really gone away completely," said Rhona O'Connell, head of
market analysis for EMEA and Asia at INTL FCStone. "There is still
some concern about the fact the deal is yet to be signed," she
said.
Ms. O'Connell thinks gold prices are unlikely to fall
significantly in the coming months because speculative investors
who made short-term bets on the metal have already exited the
market. That has left a "bedrock" of fund managers who intend to
own gold for a longer period, she said, adding that demand for
physical gold could rise ahead of Lunar New Year on Jan. 25.
David Govett, head of precious metals at London-based brokerage
Marex Spectron, agrees. "The market is happily long," he said.
"It's proper money in there."
Money managers are still wagering that gold prices will rise,
though they have trimmed the size of these bets since late
September. As of Dec. 17, investors held 219,268 more long
contracts than short contracts, the Commodity Futures Trading
Commission said on Friday, up from 56,949 at the start of 2019.
Other precious metals are also having a strong end to the year.
Silver rose 0.8% to $17.36 a troy ounce on Monday, while palladium
has surged 10% in the fourth quarter.
Still, Mr. Kassam said that accelerating global growth means
precious metals are unlikely to rise much further in 2020, barring
an unexpected spike in inflation or weakening in the U.S. economy.
State Street's absolute-return strategy recently sold some gold
futures and bought commodities such as oil and copper, which Mr.
Kassam said are more likely to benefit if the world economy picks
up speed next year.
Elsewhere in commodity markets on Monday, natural-gas futures
dropped 4.6% to $2.22 a million British thermal units. The decline
extends a recent slump and comes after Russia and Ukraine clinched
a transit agreement for gas deliveries into Europe, warding off
disruptions in the New Year.
U.S. crude-oil futures fell 0.4% to $60.23 a barrel, and copper
futures fell 0.7% to $2.81 a pound.
Write to Joe Wallace at Joe.Wallace@wsj.com
(END) Dow Jones Newswires
December 23, 2019 10:17 ET (15:17 GMT)
Copyright (c) 2019 Dow Jones & Company, Inc.
State Street (NYSE:STT)
Historical Stock Chart
From Mar 2024 to Apr 2024
State Street (NYSE:STT)
Historical Stock Chart
From Apr 2023 to Apr 2024