Gold prices could resume climb; how should investors position for a rally?

SINGAPORE (July 17): At US$1,217.12 an ounce on July 11, the price of gold is 6% below its year-todate high of US$1,294.39 an ounce. Anticipation of higher interest rates may have been behind the recent selldown, as some investors moved out of gold and into higher-yielding US Treasury bonds. And as investors’ appetites for risk improve, money is flowing out of safe-haven assets and into riskier ones.

But some market watchers are suggesting that gold prices have bottomed out and may even head higher. Greater geopolitical uncertainty as well as volatility in the US market linked to President Donald Trump’s ties with Russia may create more demand for gold going forward. And a correction in equity markets — now viewed as increasingly possible after a multi-year rally — could nudge investors towards commodities.

Julius Baer’s commodities research analyst Carsten Menke says in a media commentary that positioning among short-term traders is now “neutral to slightly bearish, limiting downside for gold from today’s levels”.

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