Gold Price Bounces Off Five-Week Low As Investors Search For Safe-Havens - Analysts

February 8, 2018

New York (Feb 8)  Gold prices have bounced off a five-week low, finding new technical momentum because of safe-haven demand according to some analyst.

April gold futures have pushed to session highs Thursday afternoon -- last trading at $1,319.90 an ounce, up 0.40% on the day -- as equity markets across the board push lower. At one point the Dow Jones Industrial Average was down more than 600 points intraday.

Sean Lusk, director of commercial hedging with Walsh Trading, said that in these current market conditions he expects gold to continue to do well as fund managers take more defensive positions in the marketplace.

“There is no impetus to short gold in the face of massive uncertainty and volatility,” he said. “Prospects for gold down the road are looking pretty rosy.”

George Gero, managing director with RBC Wealth Management, agreed that investors are now starting to take notice of gold as a safe-haven asset.


“We are seeing bargain hunters come in who are trying to hedge against volatility and rising inflation fears,” he said.

Gold’s bounce off a five-week low comes as the U.S. dollar pushes higher as it managed to hit a two-week high. However, Lusk said that with rising “risk off” sentiment in the marketplace, gold and the U.S. dollar can rally in tandem.

However, while analysts see further potential for gold, the outlook for the U.S. dollar is not as clear. U.K.-based research firm Capital Economics said that it had abandoned its higher dollar outlook. In a report Thursday the firm said that it doesn’t see a complete collapse in the greenback, but it is not expecting to see any material strength either.

Currency analysts at TD Securities said that they prefer to sell rallies in the U.S. dollar as the market remains stuck in a bear market.

Renewed momentum in gold comes on the same day that Goldman Sachs updated its forecast for the yellow metal. The global investment firm said in a report Thursday that gold could push to $1,450 in a year.

The firm said that they think gold has room to move higher as the U.S. dollar loses more ground to emerging market currencies. At the same time, they said that gold also looks attractive as a hedge against “systematic risk” if equities see a deeper correction.


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