190901 gold
ETF (Exchange-Traded Funds) holdings of gold are now at their highest level since 2012, according to Bloomberg data. Picture for illustrative purposes only. Image Credit: Supplied

Dubai: Concerns about a trade war between the world’s two largest economies will continue to impact financial markets this week, as investors eye the US President’s Twitter account for hints on which way tensions are headed.

Uncertainties from the UK’s Brexit strategy will also hit sentiment, analysts said, likely leading to more gains in gold prices. Gold prices closed over the psychological $1,500 mark in early August, and analysts expect more gains ahead, supported by trade concerns, Brexit, and easing monetary policies.

Hussein Sayed, chief market strategist at FXTM, said he believes gold prices can go above $1,600 by the end of this year. Prices of the yellow metal have been on the rise since late May, climbing from $1,282 to their current levels of $1,529.

“Gold has been rising on all these [trade] tensions but it didn’t really drop when things started to calm down even as US equities, for example, recovered. This is a very good indication that although investors are [piling on] more risk in equity markets, they still want to hold a safe-haven,” Sayed said.

$1,529

Current gold price per ounce, up from $1,282 in May

He attributed this to the rise of negative-yielding debt globally.

“If you look at the bonds market, which is an alternative safe haven, now you have more than $16 trillion in bonds trading in a negative yield, so gold is a better alternative for the time being,” he said.

“I think, overall, with central banks across the globe looking to further ease monitory policies, this should continue supporting gold for the medium term.”

$16tr

Value of global bonds currently trading in a negative yield

Ole Hansen, head of commodity strategy at Saxo Bank, echoed a similar view, saying he maintained a bullish outlook on precious metals. In a note, he said that renewed dollar strength may provide a challenge in the short-term, but as long as gold remains above $1,490 per ounce, “we are unlikely to see any major appetite for adjusting long positions.”

ETF (Exchange-Traded Funds) holdings of gold are now at their highest level since 2012, according to Bloomberg data.

In equities, analysts said the round of tariffs imposed by the US on China and that takes effect from today, has already been priced into markets, and is unlikely to drag indices down.

Analysts said the US-China trade war is expected to be a “long-lasting one” albeit with some temporary reliefs.

Charles-Henry Monchau, managing director of investment management at Al Mal Capital in Dubai, said the trade war is likely to bring with it some upward pressure on market volatility. He added that expected US President Donald Trump to soften his tone with China, though, as he pushes for growth ahead of elections in 2020.

Trade tensions aside, all eyes will be on the labour market data and manufacturing data coming out of the US this week as investors look at hints for whether the Federal Reserve will add more stimulus or not, Monchau said.

Local markets

Dubai: Abu Dhabi’s main stock index slid 0.86 per cent on Sunday to close at 5,121.17 as share prices of blue chips First Abu Dhabi Bank (FAB) and Etisalat inched lower.

FAB’s share prices dropped 1.31 per cent, as Aldar Properties ended flat, and Etisalat ended 0.59 per cent lower. Total trade value on the bourse dwindled to under Dh100 million for the day, as some companies in the UAE were off for the day for an extended Islamic New Year holiday.

In Dubai, the main index was nearly flat, ending at 2,758,34 (0.01 per cent lower). Emaar accounted for the bulk of trade, and ended the day 1.01 per cent higher.

SAFE HAVEN
Uncertainties from the UK’s Brexit strategy will also hit sentiment, analysts said, likely leading to more gains in gold prices.