FX.co ★ Gold: on the way to new heights

The rapid growth in the value of gold, perhaps, has become the main and very unexpected trend this year. For several years, the course of precious metal did not show such dynamics. Should we expect a further increase in quotations?

Although at the end of last week, many traders were reluctant to admit that gold has all the chances to break above $1,500 per ounce but on Monday, it managed to test the resistance of $1,550.

Despite the desire of the United States and China to return to trade negotiations and the assumption that the head of the White House Donald Trump will change his position at the weekend, regretting the excessively tight negotiation line, gold met with steady support above the August highs, which confirmed the validity of the upward trend.

However, trade wars – a medium-term factor in terms of supporting the cost of precious metal, which will be updated, then lose its sharpness. The long-term factor of support of buyers of precious metal is the preservation of interest in gold from the central banks, which in the coming years will increase the reserves of the precious metal as part of the diversification of their assets.

Gold reached six-year highs above $1,500 per ounce this year amid increasing demand for precious metal amid trade tensions, slowing global economic growth and investors' desire to find an alternative to risky assets, including stocks.

Citigroup experts point to the possibility of continuing the rally of gold when breaking the technical level relative to the benchmark of the US stock market.

"The correlation of gold with the S&P 500 index is testing a key level with the capture of the Christmas peaks," bank strategist at Shyam Devani said.

"It's just a matter of time before a significant "bullish" breakthrough occurs, which could trigger a 25% increase in the cost of precious metals," he added.

UBS predicts that prices will rise to $1,650 in the next 12 months, as monetary easing by leading central banks will encourage capital inflows into gold-backed exchange-traded funds.

According to experts, it is worth buying gold not only because of its ability to rise in price in the context of financial and economic crises but also in connection with the expected weakening of the US currency. The Fed may continue to lower interest rates in the coming meetings, which will lead to a fall in the yield of US Treasury bonds and deprive the greenback of support. Gold will only benefit from this.