Gold price forecast to soar 50 per cent amid euro-zone uncertainties
by Enoch Yiu. South China Morning Post.
A series of presidential elections in Europe may endanger the euro and stock markets while benefiting gold prices, which will get added lift from falling yuan.
Gold traders expect the price of gold to climb between 25 per cent to 50 per cent next year as a coming swarm of political uncertainties will lead investors to bet on the precious metal.
Haywood Cheung Tak-hay, the honorary permanent president of the Chinese Gold and Silver Exchange Society, said that events so far this year had caused the per ounce price of gold to fluctuate between US$1,100 and US$1,377.
“The many surprise results this year, ranging from the Brexit vote in June, when Britain voted to leave the European Union in a referendum, to the surprise result in November when Donald Trump was elected president of the United States, have all shocked the investment markets. This has led investors to buy in gold,” Cheung told the Post.
He said this trend would continue into next year, and he expected gold to hit US$1,500 per ounce.
“The political uncertainties are likely to continue to haunt investment markets next year. There are presidential elections in France, Germany and the Netherlands. These will all introduce uncertainties in the market,” Cheung said.
In addition, Britain is expected to start negotiations on its exit from the EU from April, which Cheung said may be a source of further shocks on investment markets.
While Trump has not yet announced his policies, Cheung believes they will bring changes in international trends and the global economy.
“Whenever there are uncertainties, investors like to invest in gold as a safe bet. I believe the price of gold could go up to more than US$1,500 per ounce next year which would be the highest in three years,” he said.
Cheung said the devaluation of the yuan, which has dropped 7 per cent this year after a decline of 5 per cent last year, would also push mainland investors to hedge their currency risks with gold.
Jasper Lo Cho-yan, the chief executive of King International Financial Holdings, echoed Cheung’s view that gold will continue to rise, but he believes that the price will not stop at US$1,500.
“The price of gold will reach US$1,800 per ounce, I believe, up about 50 per cent this year,” Lo said.
Lo said investors would turn to gold as a safe haven whenever stock markets and the economy looked shaky.
Before the elections next year, investors will be keeping an eye on a referendum result from Italy on Monday morning.
Italian Prime Minister Matteo Renzi’s is aiming to change the Italian constitution by reducing the powers of the country’s senate, and of municipal governments across the country. While the referendum had been intended to improve the lawmaking process, it turned into a national referendum on Renzi’s own government performance. Renzi has said he will resign if the vote goes against his proposed reforms.
“The Italian referendum, like the British referendum on Brexit, may lead to a change in the leadership of the Italian government and may bring more upheaval to an already uncertain euro zone. This could hurt the stock market and be a factor that would help the price of gold in the next few months,” Lo said.
Joseph Tong Tang, the chairman of Morton Securities, also believes that European markets will be seeing more unsettling times ahead.
“The Italian referendum, the possible leadership changes all over Europe may lead more nations to follow Britain’s lead in leaving the European Union. The disintegration of the European Union would endanger the future of the euro. We will see more uncertainties in the European market and the euro zone,” Tong said.