Gold price gains will likely be driven by fresh safe haven demand on equity concerns, higher financial volatility and economic uncertainty, said HSBC, leading the bank to lift its 2019 average dollar price for the yellow metal to $1,314/oz Tuesday.
The original estimate was $1,292/oz, according to HSBC's chief precious metals analyst James Steel.
"Gold prices are recovering from heavy investor liquidation and losses throughout much of 2018. Recent equity market declines, higher financial market volatility and other risks are triggering renewed investor demand for bullion," Steel said. "Geopolitical and trade risks, which unusually did not lift gold last year (due to the strong US dollar), also appear to be turning positive. We believe gold is set to move higher in 2019, especially if the global economic outlook remains uncertain."
Gold has been toying with the $1,300/oz marker so far in 2019, although for now that target has alluded bullion. Gold was spot bid at $1,284/oz as of 1420 GMT Tuesday.
"Our FX view is for a stronger USD, which may present the greatest threat to gold and will at the least limit rallies. Gold is inversely related to US equities, and we believe an important price driver in 2019 will be equity direction and volatility. Recent equity weakness has buoyed gold," Steel added.
Looking at positioning, Steel noted that COMEX was net short in 2018 for the first time since 2001, which has since been scaled back. "Further short-covering and builds in longs are likely in 2019," the analyst said.
Industry lobby group the World Gold Council said Tuesday that gold-backed ETFs continued to rally in December against a backdrop of market volatility, marking the third consecutive month of inflows. Global ETFs increased 3%. or by $3.1 billion, driven by North American and European fund activity, WGC said.
