US slowdown affects gold prices

While gold prices in most years have posted rallies at the end of the year, a strategist at the World Gold Council expects to see more investment in the market in early January.

The gold market fluctuated last week after the release of US economic data including the PMI and non-farm employment figures.

"I think it seems clear that the US economy did slow down quite a bit through the course of 2019," said John Reade, head of research and chief market strategist at the World Gold Council. "But that slowdown appears to be ending a little bit now, and this I think is one of the reasons why gold prices came under pressure over the past two or three months.

"It's still posting very strong gains for the year, but gold hit a high of about US$1,500 an ounce back in September."

He added: "We might see gold do well in December, but I would be more interested in watching what people do in January 2020.

"In January when people start to redeploy or change their asset allocation or put their bets on again, I think they will look at the prospects of the gold market positively, so I would not be surprised to see a fair amount of investment in early January."

Considering the current circumstances with increasing uncertainties in the global economy, "this is a good time to have more gold than investors' regular strategic holding and to think about tactical positioning as well," Reade said.

On US-China trade talks, which can be a major factor influencing gold prices, Reade said: "I think the hope is that a trade deal will be reached between China and the United States, although we are still waiting.

"I think it is in both countries' interests for the trade talks to be successfully concluded and for the trade tensions that we are seeing to go away, but sometimes politics gets in the way."

Meanwhile, Reade agrees with the analysts who say the Federal Reserve meeting this week will be a non-event.

"The bigger question is what would we see next year," he said. "I would expect to see one or two (Fed interest rate cuts) next year."

The weakness in the global economy will keep longer-term interest rates down as "lower for longer." That's an environment where investors would increasingly turn toward gold, Reade said.

In terms of the European Central Bank, which is also making its interest rate announcement this week, Reade expected "to see very easy monetary policies from the ECB next year because of the weakness in the economies and because of an unwillingness of governments to spend, particularly the German government."