Upside to gold in ringgit terms to be partially offset by stronger currency
KUCHING: The upside to gold in ringgit terms will be partially offset by analysts’ projection of a stronger ringgit, as they believe it will appreciate to RM3.80 per US dollar by end-2018.
According to Aff in Hwang Investment Bank Bhd ( Affin Hwang) in the downside risk section of its TradePlus Shariah Gold Tracker report, gold prices in US dollar terms have seen some downside so far this year, having fallen by 0.3 per cent to US$1,292.25 per ounce (oz), while in ringgit terms, gold has fallen by 2.3 per cent to RM5,174.20 per oz.
“Going forward, we believe there are certain downside risks for gold prices in in US dollar terms in 2018,” the research firm said.
“Meanwhile, the upside to gold in ringgit terms will be partially offset by our projection of a stronger ringgit.”
“The ringgit is anticipated to remain volatile in the first half of 2018 (1H18) and it will appreciate to RM3.80 per US dollar by end- 2018, supported by steady sustained economic growth this year and expectations of higher commodity prices.”
Affin Hwang highlighted that despite the recent announcement that Federal Government debt and liabi lities amounted to RM1.087 trillion, 80.3 per cent of gross domestic product (GDP), as of December 31, 2017, the government’s reassurance of achieving the fiscal deficit target of 2.8 per cent of GDP for 2018 through a number of measures such as reallocation of expenditure priorities, the reinstatement of Sales and Services Tax (SST), higher dividend from Government Linked Companies (GLC) should aid in making up for some revenue loss from the reduction of goods and services tax (GST) to zero per cent from six per cent, effective June 1, 2018.
This will thus support market sentiment around the ringgit, the research firm said.