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Gold hits all time high in Australian dollars

Topics [ gold analysis gold prices gold bullion prices ]

Gold continued to rally last week, with the price in United States Dollars at one point surging beyond USD 1,350oz. In Australian dollars, it hit a new all-time high above AUD 1,950oz, continuing a strong upward trend that has been in play since late April this year.

The table below shows the price of gold and silver (in both AUD and USD), as well as the performance of the S&P500 and the ASX 200 over the past week, month and year. It shows gold outperformed equity markets, though silver lagged.

The rally in gold has been driven by a handful of factors which include - 

 • A continued plunge in global bond yields, with US 10 year bond yields now sitting at just above 2%. Since late 2018, the market value of debt trading with a negative yield has almost doubled and currently sits at approximately USD 12 trillion, according to a 17 June article published in The Financial Times. 

 • Expectations of monetary easing by the US Federal Reserve (Fed). Some economists see the Fed cutting interest rates as soon as July 2019, with PIMCO, the world’s largest bond fund manager, suggesting the Fed might cut rates by 0.50% if “tensions between the US and China are not at least scaled down before or during the G20 meeting in late June”.

 • Escalating geopolitical tensions in the Middle East, with two oil tankers attacked in the Gulf of Oman last week.

Australian dollar investors in gold have also received a boost from continued weakness in the local currency, which is back below USD 0.69. Markets are now pricing in at least two more interest rate cuts by the Reserve Bank of Australia (RBA) over the next year.

If the RBA delivers what the market expects, we may see added demand for precious metals, especially if it’s accompanied by continued media speculation about the potential for quantitative easing (increasing the money supply) in Australia.

High Profile Investors Turning to Gold

Given the recent rally in gold, it is no surprise to see it find favour among high profile investors. Stephen Innes, Head of Trading and Market Strategy for Vanguard Markets, stated in an article published on 17 June: “Gold is reclaiming its rightful status as a must-have safe haven asset in everyone’s investment portfolio”.

Innes went on to state that he is “unwaveringly bullish on gold and continues to buy as it remains one of my highest conviction trades into 2020.”

DoubleLine Capital’s Jeffrey Gundlach, known in financial markets as the “Bond King” stated he was long gold in an investor webcast last week. He noted that he expected the US dollar to fall between now and the end of 2019, while he also sees a greater than 50% chance the US will enter recession within one year.

Finally, billionaire Paul Tudor Jones, fund manager and founder of Tudor Investment Corporation has said gold is his favourite trade for the next 12-24 months. In an interview with Bloomberg last week, Jones noted that gold has “everything going for it” and that if the price can push through USD 1,400oz, it will get to USD 1,700oz “rather quickly”.

Of course, it must be said that prices aren’t guaranteed to rise and after a 5% rise over the past month, some consolidation would not be unexpected. Nevertheless, we remain optimistic about the medium to long-term outlook for gold. We believe it should be on the radar of most investors given its unique qualities and the benefits it can bring to well diversified investment portfolios.


Sources:

Gundlach Quote

https://www.cnbc.com/2019/06/13/bond-king-jeffrey-gundlach-i-am-certainly-long-gold.html

Tudor-Jones Quote

https://www.kitco.com/news/2019-06-12/Gold-Price-Going-To-1-700-Soon-Says-Billionaire-Paul-Tudor-Jones-Bloomberg.html

https://www.youtube.com/watch?v=iNjOptP7jJ4

Negative Yielding Debt

https://www.ft.com/content/cf39a9a4-8ea2-11e9-a24d-b42f641eca37

Stephen Innes

https://www.fxstreet.com/analysis/gold-fever-is-spreading-201906170714

Disclaimer

Past performance does not guarantee future results.

The information in this article and the links provided are for general information only and should not be taken as constituting professional advice from The Perth Mint. The Perth Mint is not a financial adviser. You should consider seeking independent financial advice to check how the information in this article relates to your unique circumstances. All data, including prices, quotes, valuations and statistics included have been obtained from sources The Perth Mint deems to be reliable, but we do not guarantee their accuracy or completeness. The Perth Mint is not liable for any loss caused, whether due to negligence or otherwise, arising from the use of, or reliance on, the information provided directly or indirectly, by use of this article.

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