Trump era marking new age for gold as safe haven

Analysts still see the precious metal as a solid choice for long-term investment.
Analysts still see the precious metal as a solid choice for long-term investment.PHOTO: REUTERS

LONDON • The Donald 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 12 per cent next year, 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 United Kingdom'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 Mr 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 Jan 20.

Gold for immediate delivery is up 9.5 per cent this year to about US$1,162 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 US$1,300, with the year's peak seen at US$1,350. Two said the metal may reach US$1,600.

That doesn't mean there are no 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 US$1,000 in 2017, particularly if the Federal Reserve raises interest rates three times next year and Mr Trump makes good on his pledge to boost infrastructure spending to spur economic growth.

OCBC Bank'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 US$1,100 by the end of 2017.

Still, hope remains. A poll by Bloomberg Intelligence on Nov 10 showed 42 per cent of respondents predict gold will be the best-performing metal in 2017. Mr 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 US$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.


A version of this article appeared in the print edition of The Straits Times on December 31, 2016, with the headline 'Trump era marking new age for gold as safe haven'. Print Edition | Subscribe