by NUR HANANI AZMAN/ pic by MUHD AMIN NAHARUL
AFFIN Hwang Funding Financial institution Bhd expects gold costs to common greater in 2020, helped by sustained accommodative financial insurance policies amongst main central banks particularly the US Federal Reserve (Fed).
“Different dangers embrace uncertainties because of the US-China commerce stress talks proceed, potential danger of the Covid-19 outbreak and different geopolitical considerations,” the funding dealer famous in a report final week.
Utilizing the TradePlus Shariah Gold Tracker exchange-traded fund (ETF) as an avenue to spend money on the dear metallic, Affin Hwang believes the ETF’s honest worth is RM2.30 and maintained its ‘Purchase’ name on the safety.
The TradePlus Shariah Gold Tracker ETF is managed by Affin Hwang Asset Administration and has invested 99.9% of its internet asset worth in gold bars with the remaining in Islamic cash market devices and/or deposits.
For the monetary interval ended Dec 31, 2019, the TradePlus Shariah Gold Tracker ETF registered a optimistic return of 17.4%.
With a monitoring error of 0.11%, the fund has met its goal of offering buyers with funding outcomes which intently observe the efficiency of gold value.
In 2019, the worth of gold surged by 18.9% year-on-year (YoY) to US$1,523.1/ozin comparison with a decline of two.1% in 2018 to US$1,309.3/oz.
This was the quickest rise in gold costs since 2016, when uncertainties stemming from US elections, in addition to a vote for Brexit supported inflows for protected havens.
“In 2020, we anticipate haven demand for gold to be in view of financial uncertainties, as a consequence of a doable renewed commerce talks between the US and China, and negotiations could not progress previous the ‘Part One’ commerce deal in the direction of a ‘Part Two’ deal within the close to time period.
“As well as, the US has not rolled again the 25% tariffs on US$250 billion (RM1.05 trillion) value of Chinese language imports, which had been beforehand imposed. Due to this fact, this will likely proceed to weigh on enterprise sentiment,” it added.
Within the close to time period, Affin Hwang Capital believes considerations over the latest Covid-19 outbreak will seemingly proceed to drive safe-haven flows into gold.
The unfold of the virus particularly if infections elevated and proceed exterior of China, the heightened uncertainty could result in greater gold costs within the close to time period.
In ringgit phrases, gold costs could also be supported by the softer ringgit towards the buck in 2020 because the funding financial institution expects the native unit to weaken to RM4.20/greenback by end-2020.
The ringgit will proceed to be supported by the nation’s present account surplus and a wholesome stage of overseas reserves.
“We imagine uncertainties to be additional mitigated particularly if commerce talks proceed additional to a Part Two deal probably earlier than the US elections in November 2020 and if the US decides to roll again tariffs which had been beforehand imposed.
“If the Covid-19 outbreak slows down by the second quarter of 2020 (2Q20), this can result in an enchancment in enterprise sentiment and a resumption of the worldwide provide chain which is able to help international financial progress,” it stated.
As well as, AffinHwang warned if the Fed and different central banks in main economies start to tighten their respective financial insurance policies, this may additionally put some downward strain on gold costs in 2020.
As a consequence of geopolitical considerations and low-interest charges, the World Gold Council famous that holdings in gold-backed ETFs hit an all-time excessive of two,885.5 tonnes in 4Q19 in comparison with 2,858.eight tonnes in 3Q19 primarily from North American and European-listed funds.