All signs point to a third straight year of gains for gold in Year of the Ox, analysts say

Enoch Yiu
·3-min read

Gold will continue to rise in the Year of the Ox albeit at a slower pace than the previous two years, aided by low-interest rates, inflationary concerns and the Covid-19 pandemic, according to analysts.

The price of bullion in Hong Kong rose 18 per cent in the Year of the Rat to close at HK$17,050 (US$2,200) per tael (37.8 gram) on Thursday, the last trading day before the Lunar New Year holiday.

“The Year of the Ox is likely to see gold prices rising between 15 and 20 per cent to break through HK$20,000 per tael,” said Haywood Cheung Tak-hay, president of the Chinese Gold and Silver Exchange Society.

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He said that with the US likely to keep interest rates at near zero for some time and other central banks adopting monetary easing policies to boost the post-pandemic economic recovery, liquidity will inevitably find its way into gold, Cheung said.

The Year of the Ox, which began on Friday, comes second in the 12 animals of the Chinese zodiac. The 12 animals – which follow in the order of rat, ox, tiger, rabbit, dragon, snake, horse, goat, monkey, rooster, dog and pig – represent a cycle of 12 years.

Gold’s solid performance in the Year of the Rat follows an identical showing in the Year of the Pig when it rose 18 per cent. In the past five years, the metal has added 61 per cent.

In August, gold breached the US$2,000 level for the first time to reach an all-time high of US$2,075 per ounce, beating the previous record of US$1,920 in 2011. In 2020, gold gained 24 per cent, compared to a 3.4 per cent decline in the Hang Seng Index last year.

The surge came as investors sought refuge in the safe asset amid concerns over political tensions between the United States and China, the coronavirus pandemic, inflation, and an uncertain global economic outlook.

A gold bar on display in a shop window in the Gold Souk in the Deira district of Dubai, United Arab Emirates. Photo: Bloomberg
A gold bar on display in a shop window in the Gold Souk in the Deira district of Dubai, United Arab Emirates. Photo: Bloomberg

“We expect that the Year of the Ox would also be good for gold,” said Joshua Rotbart, founder and managing director of Hong Kong-based J. Rotbart & Co Precious Metals, which trades gold and other precious metals.

“The end of Covid-19 is not in sight, unfortunately, which means a continuation of the global economic downturn. This also means that investors will still be looking for liquid safe-havens, and gold is one of those assets.”

Rotbart, however, said that although global inflationary concerns and low-interest rates will continue to support gold, prices may appreciate at a slower pace than the previous two years at around 10 per cent this year.

“The outlook remains favourable for gold,” said Stephen Innes, a strategist at Axi, a Sydney-headquartered forex and commodities trading firm. “I think the US dollar will weaken going into midyear before stabilising which should be favourable for gold.”

However, not everyone expects the bull run to continue.

The factors that supported gold’s rise – pandemic, inflation and uncertain global economic outlook – will dissipate, said Jasper Lo, a veteran gold trader and independent bullion analyst, who forecast a 10 per cent decline in prices this year.

Since US President Joe Biden took office he has introduced a lot of measures to boost the economy, which has boosted US and international stock markets, he said, adding that Covid-19 vaccination programmes may help to bring the pandemic under control.

“This will cut down the demand for gold as a safe haven,” Lo said.

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