Analysts say the high probability of another precious metal rally is currently high, despite massive purchases of gold by both the leading central banks of the world and by active market participants. This is facilitated by the unstable geo-political situation, which was “fueled” by the escalation of the trade conflict between the US and China and the deterioration of the prospects for the global economy.
Gold is currently trading at its highest over the past six years. The increase in the cost of the yellow metal is facilitated by a massive reduction in rates by the largest central banks and the devaluation of the Chinese currency. In such a situation, gold becomes a reliable protective asset that is not subject to government control. Central banks provided an additional incentive to purchase precious metals due to the easing of monetary policies, experts emphasized. The Reserve Bank of New Zealand (RBNZ) surprised markets by cutting its interest rate by 50 basis points (bp) to 1%. Other regulators, such as the Central Bank of India and the Central Bank of Thailand, also cut rates – to 5.4% and 1.5%, respectively.
On the Monday auction, August 12, gold actively held a leading position and held in the “green” zone. The number one precious metal was trading at $1,502 per 1 troy ounce. Last week, the price of the yellow metal updated its six-year high amid tensions in Sino-US relations, as well as in connection with a slowdown in global economic growth. Precious metal is currently trading at $1,536 per 1 troy ounce.
When analyzing the dynamics of gold, experts pay attention to the specific alignment of the target level at $1,550. Experts are sure that if it exceeded, buyers will have a road to such indicators in $1600, $1700 and $1800. A similar increase is expected if demand for defensive assets increases. At the moment, a strong support level is located near the value of $1450.
According to Whitney George, head of the hedge fund for precious metals, protracted trade conflicts will escalate into currency wars. The latter may lead to devaluation of national currencies. In the event of such a development of events, the value of gold will grow exponentially, convincing W. George.
Currently, analysts at leading US investment banks predicts a rise in prices for the yellow metal. They believe that the price of gold will rise to $1,600 per 1 troy ounce at the beginning of 2020. After two years it will increase to $2,000 per 1 ounce. Most traders and experts, namely 69%, are optimistic about the future prospects of precious metals.