Gold set for best year since 2010 as trade tensions boost safe haven

Tom Belger
Finance and policy reporter
Gold is set for its best year since 2010. Photo: Uli Deck/picture alliance via Getty Images

Gold prices are set for their best year of gains since 2010, as global trade tensions have spooked markets and sparked a rush for the ‘safe haven’ asset.

Spot gold prices hit a six-week high on Tuesday morning, rising around 1% to $1,491.80 an ounce.

Analysts said weaker data on the US economy had sparked the rally. Data on Monday showed growth in new orders for key capital goods production almost grinding to a halt, according to Reuters.

Uncertainty remains high over the US-China tariff war, despite recent announcements of progress towards an agreement by both sides.

"We are still not 100% clear if the 'phase one' deal will go through or not, it has not been signed yet,” Stephen Innes, a market strategist at AxiTrader, told Reuters.

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“We then pivot to 'phase two' that suggests you need some gold, because we don't know what the next phase is all about, how contentious of a deal that is going to be."

He added that concerns remained about how big of a toll the current Chinese tariffs hitting US firms would continue to impose on the US economy in 2020.

The tensions over the past year have rattled investors. Despite more recent stock market recoveries, gold remains on track for its best year in nine years, up 16%.

Ajay Kedia, director at Kedia Advisory, also told Reuters: “In 2020, we may see equity markets starting to slip because we have already seen multi-year highs and any correction in equities will help gold.”

Several analysts said many portfolio managers were in a defensive mood as the year comes to an end, nervous about how long the stock market rally would last.

“After such a strong year, when almost every single asset class was up double digits, this is probably a prudent time to ‘play some defense’ and hedge your risk heading into 2020, especially with gold prices trading at a minor discount relative to recent months,” Marios Hadjikyriacos, investment analyst at XM, said in the Guardian.

Altaf Kassam, EMEA head of investment strategy at State Street, also said in the paper: ““The fact that investors are still holding a decent chunk of gold gives you a good feeling as to how they are literally hedging their bets.