As 2019 comes to an end, wealth builders will surely look back and marvel at how gold price had stormed back in style. Since the beginning of the year, gold price had surged 17% to reach a six-year high. The last time that gold price was in such bullish form was 2009 – 2011. That was the tumultuous period in the aftermath of the Great Financial Crisis and European debt crisis.
Since 2011, global loose monetary policies and low interest rate environment caused gold price to fall from a record high of USD1900 to a low of USD1068 per ounce in 2015. The crash of gold price was the result of recovering US economy and strengthening of US dollar.
Question now is whether gold price will reach another high in 2020? In this regard, I don’t see why not. This is because the world has not seen another alternative safe haven for financial assets. And gold has always been used as a form of hedge against uncertainties and volatility in the financial markets.
In 2016, the crash of China stock market, UK Brexit and the US Presidential Election saw gold price surging from USD1100 to USD1300 per ounce. Based on these events, my opinion is that gold price may stage another magnificent run in 2020 due to the following factors.
Forecast for gold price in 2020
Interest rate: One of driving factors for gold price in 2019 was the interest rates, which was cut three times by the US Federal Reserves. As gold does not yield interests, investors tend to switch to higher-yielding instruments like bonds when interest rates increased. Conversely, when interest rates dropped, investors are more likely to look at investing in gold.
Of course, one shouldn’t view interest rate as the sole function of gold price, which …Read more