Gold was the talk of the markets as the precious metal surpassed another major hurdle reaching $2 000 per ounce for the very first time on Tuesday. Photo: Bloomberg Gold was the talk of the markets as the precious metal surpassed another major hurdle reaching $2 000 per ounce for the very first time on Tuesday. Photo: Bloomberg
JOHANNESBURG – Gold was the talk of the markets as the precious metal surpassed another major hurdle reaching $2 000 per ounce for the very first time on Tuesday.
This $2 000-an-ounce mark, according to market watchers, is a significant psychological resistance level, with gold’s 49-year trend channel resting just below at $1 983 per ounce.
Chairperson of The South African Gold Coin Exchange and The Scoin Shops, Alan Demby, said the rally was being driven by the market sentiment that gold would hold its value better than other assets, amid fallout from Covid-19, central bank stimulus, inflationary concerns and a weakened dollar.
This backdrop is enhancing safe-haven demand for the yellow metal.
“Bullion has surged more than 30 percent so far this year to a record high and is one of the best-performing assets in 2020 as a result of increased safe-haven demand during these uncertain economic times,” said Demby.
However, because the rally was so rapid, a downward correction was likely and could be brutal, before the market attempts another stab higher. Demby said: “I believe the outlook for gold remains constructive and I see a continued improving volatility backdrop, so there’s no sign that the long-term trend is changing.”
Chief market strategist at FXTM Hussein Sayed said gold’s explosive momentum mirrored a train reaching full velocity with fundamentals keeping the engines running at maximum capacity.
“Will bulls have enough energy to challenge $2050 and beyond by Friday or will there be a retracement back towards the psychological $2000 level? Time will tell.
“A broadly weaker dollar, crumbling US yields, pre-election jitters and rising coronavirus cases in the United States among other themes have boosted Gold’s allure,” said Sayed.
The dollar has been weakening against every single G10 and most emerging market currencies since the start of August. “With the Dollar falling victim to crumbling US yields, uncertainty over the latest coronavirus relief package and shaky economic fundamentals, emerging market currencies like the rand have the potential to appreciate,” said Sayed.
The rand drew support from the dollar weakness coming off two-month lows on Tuesday.
At 1:30pm the domestic unit was at R17.27 versus the dollar, from an opening bid of R17.35 a dollar.
Market watchers expect buying sentiment towards the rand to improve further on the back of the latest IHS Standard Bank PMI figures for July which rose to 44.9 from 42.5 in the prior month.
BUSINESS REPORT