Gold ended 2018 on a high note, beating global equities and commodities for the fourth quarter. Gold is a highly liquid asset and hence investors are majorly diversifying their portfolio towards gold as it proves to be a hedge tool and a safe haven asset in times of uncertainties.
There is quite some scope for the yellow metal and commodities in general in 2019 because investors believe that the current rate hike cycle has peaked and the U.S. dollar looks to be in retreat, having lost about 1.7 percent over the past month.
After four rate hikes in 2018, the Federal Reserve pausing interest rates in 2019 could also result in a weaker dollar and stronger demand for gold.
Gold is currently trading at $1,290 and moved in the high and low range of $1,295 and $1,287 on Tuesday. But this pullback is expected to be short lived as China is stepping up monetary and fiscal stimulus efforts to support its sagging economy. The People’s Bank of China (PBOC) injected a record CNY 560 billion via reverse repo operations earlier today. Further, China is reportedly planning large scale tax cuts to boost spending.
History shows that monetary and fiscal stimulus has a positive impact on gold. Further, current unrest and political uncertainty in the UK could boost demand for the yellow metal.
Though strong U.S. dollar might have thwarted gold, but global growth concerns and other broad market worries could give the precious metal a boost.
Currently the markets are uncertain, economic numbers are dipping and stock markets are volatile. All these clubbed together are bound to give a push to the precious metals as investors look up to them as safe haven assets.