ECONOMIC and investment drivers supportive of the gold price would begin to re-asset themselves in time, said Reuters citing analysts.
Gold prices rose on Tuesday, supported by fears of a global recession and fallout from central banks’ stimulus measures, while an uptick in risk-appetite after a positive report about a potential COVID-19 vaccine limited bullion’s advance, said the newswire.
“Right now, market is focused on the aftermath of the big rally in stock markets yesterday that has taken some of the bid out of gold, but the underlying demand has not gone away,” Saxo Bank analyst Ole Hansen told the newswire.
“We are looking at weaker economic outlook, massive amount of central bank measures in market and also have the tensions on the geopolitical front which should keep gold prices higher,” he said.
“Central bank’s worrisome balance sheet expansion is unequivocally one of gold’s primary drivers. And hedging against an escalation in US trade tensions also seems like a great idea,” said Stephen Innes, chief market strategist at financial services firm AxiCorp, in a note.
“With interest rates near 0% global opportunity cost of owning gold remains alternatively attractive to currency hedges as the path of the US-China trade war could be paving the way higher with gold bars,” he said.
Cited by Reuters, chief market strategist for the World Gold Council, John Reade, said in April of the disruption caused by COVID-19 pandemic: “This is the biggest change to the market that I can remember. It’s very clear that you ain’t seen nothing yet”.
