Gold price edges higher on safe-haven status demand

Gold price edges higher on safe-haven status demand

The gold price edged higher in Monday trade, as investors bought the precious metal as a safe-haven purchase as US stocks lost a little favour.

The gold price was trading close to $1,279 per ounce earlier Monday, up around 0.5% from the previous week. The gold price slid 0.7% on Friday.

Investors sought the yellow metal, as a subdued open is anticipated for US stocks amid a cautious tone on a number of details.

Narrow range

While the gold price is higher Monday, it remains range-bound. That’s because the precious metal has received support recently from ongoing geopolitical news.

However, the US Fed is set to raise interest rates next month and some three times during 2018. That’s news that supports the dollar at a higher level. And, when the dollar gains strength, the price of gold can fall, as it becomes more expensive for purchases made in other currencies.

Indeed, analysts say they don’t expect the gold price to rise above $1,300 per ounce any time soon.

“In lieu of major developments, it is difficult to see gold finding the support necessary for a move back toward $1,300 over the near-term," said Sam Laughlin in a research note to MKS PAMP clients, according to CNBC.

‘Neutral’ on gold

In line with that comment, UBS last week said they were switching to a neutral bias on gold. The financial services firm was previously bullish on the commodity and had been for two years.

UBS strategist Joni Teves said in a research note last week that gold is likely to average at around $1,285 per ounce over the course of 2018. So, while no sell-off is anticipated, without any major catalysts, nor should it be an investment to be overbought, either.

“Against this backdrop, it becomes difficult to justify a strong rally in gold prices,” Joni Teves said. “Yet, we don’t think there is a compelling reason for a sell-off either. Our assessment of the global macro landscape is instead more consistent with gold prices that are likely to be well-supported, yet capped at the same time”.

By Ilona Billington
Ilona is a freelance writer and editor with over 15 years experience reporting and writing about UK and European economics, real estate, financial markets and central banks.

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