Dubai: Global stock markets are likely to see more volatility going forward, but that is still unlikely to drive investors towards gold as a safe-haven, analysts said.
After a volatile first half of the year – with the Volatility Index (VIX) up 45.7 per cent year-to-date – concerns about global trade tensions are expected to continue hurting investor sentiment, and hence, riskier assets.
But with a stronger US dollar, investors are likely to stay away from gold.
“The precious metal is on track to record its worst quarterly loss since the end of 2016 and third consecutive weekly loss. Given that we have broken the $1,250 support, it is likely that the price may test the $1,235 mark…” said Naeem Aslam, chief market analyst at Think Markets UK.
In a note, Aslam pointed to reports that showed that investors are still dumping gold. This is amid a hawkish tone from the US Federal Reserve that is expected to continue hiking interest rates, further boosting the dollar.
Gold prices are currently trading at around $1,252 an ounce, with a year-to-date decline of 3.85 per cent, and an 8.3 per cent decline from their 52-week highs of $1,366.
Similarly, Lukman Otunuga, research analyst at FXTM, said gold “remains bearish” on the daily and weekly charts, predicting more weakness in the metal.
Away from gold, stocks could face more volatility soon, analysts said after the Shanghai Composite entered bear market territory last week.
“Stay invested, but be prepared for more volatility going forward,” said Charles-Henry Monchau, managing director of investment management at Al Mal Capital. “Within US equities, we like domestic relation stories (small and mid-caps, industrials, regional banks, capex-oriented IT).”
“In non-US markets, Japan still looks interesting; it is cheaper, has best earnings growth next year, and monetary policy is still accommodative.”
Monchau added that he remained long-term bullish on the economy and risk assets, though that should not prevent markets from being volatile on the medium term.
