Khaleej Times

Trump’s Twitter age brings uncertaint­y, reviving gold demand

- Eddie van der Walt, Luzi Ann Javier and Ranjeetha Pakiam

london — The Donald J. Trump era is marking a new age for gold as an investor safe haven.

While the precious metal has always been hoarded in times of trouble, a bevy of political and economic surprises in 2016 sparked a surge in buying that sent bullion to the first annual gain in four years. Prices may rally about 13 per cent in 2017, according to a Bloomberg survey of 26 analysts.

Fuelling the bullish outlook is the risk of chaos on multiple fronts: a possible trade war from America’s fraying relationsh­ip with China, the alleged Russian hack of US political parties, the UK’s complicate­d exit from the European Union, and elections slated in France, Germany and the Netherland­s that may see a rise of nationalis­t groups. And then there are Trump’s frequent Twitter posts, in which the US president-elect feuded with rivals and made declaratio­ns that unsettled allies even before he takes office on January 20.

“140 characters of unfiltered Trump is likely to create tensions with America’s largest trading partners,” Mark O’Byrne, a director at broker GoldCore Ltd in Dublin, said by e-mail. “Markets that are already shaken by the fallout from Brexit, the coming elections in Europe and indeed the increasing specter of cyber warfare could again see a safe-haven bid.”

Gold for immediate delivery is up 8.9 per cent this year at $1,155.12 an ounce, halting a three-year slide. More than two thirds of the analysts and traders surveyed from Singapore to New York said they were bullish for 2017. The median year-end forecast was $1,300, with the year’s peak seen at $1,350. Two, including O’Byrne, said the metal may reach $1,600.

Demand for bullion would get a boost if elections in Europe see gains by anti-establishm­ent parties, according to Commerzban­k analysts led by Eugen Weinberg. Increased protection­ist policies and the potential for a trade war between Trump’s administra­tion and China may also help push gold higher, they said.

In a growing number of countries, “there are nationalis­tic tendencies, more isolationi­st tendencies,” said Peter Marrone, the chief executive officer of Toronto-based Yamana Gold, which owns mines in Canada and South America. “That will create geopolitic­al and socio-economic volatility, perhaps instabilit­y, certainly risk.”

That doesn’t mean there aren’t reasons to be bearish. After starting 2016 with the biggest first-half rally in four decades, prices fell from their peak in July and investors have cut back on bullion holdings. That was mostly because an improving US economy and higher interest rates made other assets more attractive, including equities. Four of the analysts in the Bloomberg survey predicted bullion would drop below $1,000 in 2017, particular­ly if the Federal Reserve raises interest rates three times next year and Trump makes good on his pledge to boost infrastruc­ture spending to spur economic growth. Holdings of the metal in exchange-traded funds — which had reached a three-year high in October — dropped for 33 straight days after the US election on November 8, the longest slide since 2004, data compiled by Bloomberg show.

Goldman Sachs Group analysts said in a note on November 21 that the bulk of new investment­s in goldbacked ETFs are losing money and that further selling in ETFs could exacerbate price declines. Citigroup also cited downside risks from a potential selloff in gold ETFs, while Bank of America Merrill Lynch said the metal is in the doldrums as the

140 characters of unfiltered Trump is likely to create tensions with America’s largest trading partners Mark O’Byrne, Director at GoldCore Ltd

economic policy outlined by Trump push rates higher.

Singapore-based Oversea-Chinese Banking Corp’s Barnabas Gan, an economist whose prediction was the most accurate among gold forecaster­s tracked by Bloomberg in the third quarter, sees the metal falling to $1,100 by the end of 2017.

Still, signs of optimism remain. A poll by Bloomberg Intelligen­ce on November 10 showed 42 per cent of respondent­s predict gold will be the best-performing metal in 2017. Ronald Stoeferle, managing partner at Incrementu­m and the most-accurate among the precious-metals forecaster­s tracked by Bloomberg last quarter, said the metal will rally to $1,422 because the Fed may turn out to be more dovish than expected, which would mean an accelerati­on of inflation that boosts the appeal of gold. — Bloomberg

 ?? — AFP ?? Gold for immediate delivery rose 8.9 per cent in 2016 to $1,155.12 an ounce, halting a three-year slide.
— AFP Gold for immediate delivery rose 8.9 per cent in 2016 to $1,155.12 an ounce, halting a three-year slide.

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