Tuesday, September 22, 2020

Gold price could continue to climb over rising inflation, mass buy-ups by large gold funds: experts

Aug 06. 2020
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By The Nation

The price of gold could rise further amid uncertainty over rising inflation and mass buy-ups by the world’s large gold funds, experts said.

Yesterday (August 5), the selling price of gold ornaments rose to Bt30,200 per baht weight, while the cost of a gold bar rose to Bt29,700 after the spot gold price hit a new high of US$2,033 (Bt62,972) per ounce.

This year, the price of gold ornaments and a gold bar rose by approximately Bt8,200 per baht weight, or 36 per cent, year on year, while the spot gold price rose by US$500 per ounce, or 33 per cent, year on year.

Benjama Ma-in, an analyst at YLG Bullion International, said the gold price rose faster than expected as it gained positive sentiment from mass buy-ups in gold after the price rose over the resistance line of $1,800 per ounce.

“However, the real factor that boosted the gold price was the inflation rate, which is likely to increase as countries move to stimulate their economies,” she said.

“Although the inflation rate in Thailand is likely to contract this year, the US Federal Reserve’s balance sheet this year increased from $4 trillion to $7 trillion in six months.”

She explained that the gold price could rise to $2,300 per ounce if many countries continued to inject money into their economies, causing uncertainty among investors over the rising inflation rate.

“For example, the US has injected liquidity until M2 money supply, including public cash and deposits, expanded by 23.19 per cent year on year, while the real yield contracted by 1.06. If the real yield contracts further, the gold price could rise as well,” she said.

“Besides, the US inflation rate could surge over 2 per cent as US economists have said that the Fed may use an average inflation policy instead of setting a 2 per cent inflation framework.”

She advised investors to closely follow the Covid-19 situation because the gold price could drop if a vaccine is successfully developed and many countries begin to ease their monetary policies.

Meanwhile, Gold Traders Association chairman Jitti Tangsitpakdee said the gold price rose over $2,000 per ounce after the destructive chemical blast in Lebanon, and political unrest.

“The price of gold could rise further as the world’s large gold funds are still buying the metal,” he pointed out.

“However, investors should pay attention even while speculating and follow the news regularly because the price is very high and the next resistance line is between $2,045 and $2,050 per ounce,” he added.

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