Gold could hit levels last seen in 2013 if the US dollar extends its slide and equity markets reverse.
Bullion at US$1,400 an ounce is “achievable” in the next two months, Stephen Innes, head of trading for Asia Pacific at brokerage Oanda Corp, said in an interview Thursday.
The Bloomberg Dollar Spot Index plunged to the lowest since 2014 after US Secretary of the Treasury Steven Mnuchin endorsed the currency’s drop at the orld Economic Forum in Davos, Switzerland.
And while global equity markets have repeatedly hit all-time highs over the past few months, gold is also on the march, rising to as much as US$1,366.15 an ounce on Thursday, its best mark since August 2016.
The metal for immediate delivery on Friday climbed 0.2 percent to US$1,361.12 an ounce, up 2.2 percent for the week, while an index of the dollar dropped by 0.5 percent.
Gold has climbed more than 8 percent since the middle of last month as the US dollar slumped and investors sought protection from a potential tumble in share markets and a resurgence of inflation.
Holdings of bullion in exchange-traded funds have grown to the largest since 2013, while money managers have more than doubled their net bullish bets on Comex since the middle of last month.
“We see a host of ongoing financial market drivers keeping the gold market tight,” Australia & New Zealand Banking Group Ltd (ANZ) analysts, including Daniel Hynes, said in a report Thursday. “Further weakness in the dollar and rising risks of a correction in equity markets, in particular, should be supportive.”
The US dollar’s decline has come amid expectations that other central banks, notably the European Central Bank and the Bank of Japan, are moving closer to cutting monetary stimulus.
In Davos, Mnuchin said that “a weaker dollar is good” for US trade, while US Secretary of Commerce Wilbur Ross said the US would fight harder to protect its exporters.
With the US dollar “prone and defenseless,” these comments added “fuel to the fire,” Singapore-based Innes said.
With these signals from the US government and other central banks, “we’re getting into a structurally weak dollar, and on a macro level, we could be moving into a cyclical bear market beyond 2018,” Innes said. “All I can possibly see right now, given this overriding weaker dollar narrative, is for gold to go higher in the short term.”
ANZ sees prices holding at current levels in the first half of this year, before pushing toward US$1,400 by the end of the year.
A cap on the US dollar this year would be useful to US trade and managing the country’s escalating debt burden, said Gavin Wendt, senior resource analyst at MineLife Pty, who also sees gold hitting US$1,400 this year.
Spot silver climbed and platinum rose for a third day, while palladium fell.
Vanadium has soared more than 130 percent in the past year, outperforming better-known battery components like cobalt, lithium and nickel.
Vanadium pentoxide, a powder form of the metal used in batteries and the steel industry, has rallied 27 percent this year to US$12.38 a pound, Metal Bulletin PLC said.
NOT ALL GOOD: Analysts warned that other data for last month might be less rosy due to the virus and analysts expect the PMI to contract again next month Chinese factory activity saw surprise growth last month as businesses went back to work following a lengthy shutdown, but analysts said that the economy faces a challenging recovery as external demand has been devastated by the COVID-19 pandemic, while the World Bank said that growth could screech to a halt. China is slowly returning to life after months of tough restrictions aimed at containing the virus, which put millions of people into virtual house arrest and brought economic activity to a near standstill. The strict measures saw a closely watched gauge of manufacturing plunge to its lowest level on record in February,
The output of the global smartphone industry this year is to contract by 7.8 percent on an annual basis as the COVID-19 pandemic ushers in a global recession, Taipei-based market researcher TrendForce Corp (集邦科技) said in a report on Monday. The global production of smartphones is expected to fall to 1.29 billion units, as the pandemic dampens demand for consumer electronics, leading to a decline in shipments across Europe and North America, TrendForce said. With consumers delaying smartphone purchases and thereby lengthening the device replacement cycle, overall prices would suffer a setback that is expected to negatively affect the profitability of smartphone
ELECTRONICS Lite-On delays sale of unit Lite-On Technology Corp (光寶科技) yesterday said it would postpone the sale of its solid-state drives (SSD) business to Kioxia Holdings Corp, formerly known as Toshiba Memory Holdings Corp, due to disruptions amid the COVID-19 pandemic. Last year, the Taiwan-based electronics components supplier struck the deal with the Japanese firm, agreeing to sell the unit for US$165 million. Citing unfinished integration work due to the pandemic, Lite-On has deferred today’s closing date until further notice, adding that the delay would not have a negative effect on the unit’s operations. AUTO PARTS Hiroca approves dividend Automotive interior parts supplier Hiroca
ALL ABOUT STRATEGY: The company is optimistic, saying that its gross margin should increase year-on-year, but it is scaling back on its plans to expand capacity Quang Viet Enterprise Co (QVE, 廣越), which makes down jackets and garments for sportswear and outdoor brands including Adidas AG, yesterday said that revenue might drop 5 to 10 percent annually this year as some customers trimmed orders in response to the COVID-19 pandemic. That would mark its first revenue decline since 2016. Quang Viet posted record-high revenue of NT$16.26 billion (US$537.45 million) last year, up 22 percent from 2018. Down jackets made up 40 percent of it revenue last year. North Face Inc and Patagonia Inc are this year likely to reduce orders by 20 to 30 percent from a