Gold headed for $1600

27 August, 2019

The gold price remains steady today after turning back from what was beginning to look like a solid rally yesterday after words by US President Donald Trump once again raised the prospects that a deal between the US and China on a trade deal could be achieved.

Trump noted that China “very badly” wants to resolve trade negotiations and the French and U.S. leaders made optimistic remarks about developments with the Asian nation. One of China’s most important negotiators, Liu He earlier called for dialogue, which also showed that the Chinese side is keen to avoid the fallout from the effects of a failed trade deal.

This uncertainty is also going to put pressure on the US Federal reserve to cut interest rates as this uncertainty between the world’s 2 superpowers has taken its toll on the US economy and now some are starting to predict there may be more rate cuts than first thought which will be another boost for gold.

“The price action in gold last night was pretty indicative of just the renewed fear, the renewed macro fear and the renewed uncertainty in the market,” said Nicky Shiels, an analyst at Bank of Nova Scotia,

“With more tariffs than any time before currently in place or being put in place, we would expect some sort of Fed easing in response to that, or accelerative Fed easing, should continue to support gold’s case.”

Analysts from UBS, one of the world’s leading banks are keeping their long positions in gold which the started back in May and project the yellow metal to hit $1,600 within six months and then climb to $1,650 in under 12 months.

The trade war between the U.S. and China has escalated to a new level," noted Giovanni Staunovo and Wayne Gordon from UBS

"Gold has demonstrated its safe-haven qualities and we stay long the metal, a trade we initiated in mid-May." They added.

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