Demand For Gold In Singapore Grows As Hong Kong Protests Intensify
After several months of lackluster performance, it seems like gold is now headed for new highs. Analysts indicate that with the growing demand for gold demand across the globe currently, the price could soon reach $2,000. This is because of slowing global economic growth and possibility of a recession, which has necessitated investing in safe-haven assets like gold.
Hong Kong protest lead to gold demand rise
The ongoing anti-government protests in Hong Kong have triggered an increase in demand for gold as well as other safe-haven assets. Last week gold was trading above $1,500, which is a new six-year high.
According to a TD Securities strategist, the protests have increased the possibility of economic disruptions. The recent shutting down of the Hong Kong airport has added pressured risk assets and increased demand of safe havens such as gold. Markets are keen on how Hong Kong will deal with the growing protests, according to Kitco analysts Jim Wyckoff. The protests have gone on every weekend, and they seem to be getting worse. Now market watchers are looking at Mainland China to move in and end the unrest that has affected markets.
Last week INTL FCStone indicated that the protests in Hong Kong have led to gold price increase as demand grows. If the situation remains unresolved, the price per ounce will soon hit $1600. Demand has also been enhanced by negative yield debt, which has jumped to around $15.5 trillion in the last year, rising by 80%.
Singaporean gold companies to gain
The civil unrest in Hong Kong has been a blessing for other Southeast Asian countries such as Singapore which investors consider as an alternative investment destination. According to J. Rotbart & Co., which is a company that helps customers to purchase the store and ship gold, there has been an increase in demand for gold from Singapore. This is despite the company being based in Hong Kong. The company says that in the past few weeks there has been a change of around 75% for Singapore to Hong Kong’s 10% for gold compared to the previous 50% to 35%.
With protests continuing on the island, there is a possibility that Chinese troops might move in to restore orders. This move is likely to result in international backlash and hurt the economy of the city irreparably. There is fear among investors that if the People’s Liberation Army descends on Hong Kong protesters, then there will be a shutdown of the airport. This will hinder shipping of their gold from the city since gold shipping is done in commercial flights.
Singapore is a business competitor to Hong Kong with its financial rivalry going back to their shared past under British colonial rule. With protests intensifying in Hong Kong, which will undermine gold investment, the obvious beneficiary will be Singapore whose policies are similar to those of Hong Kong. Singapore companies such as LionGold Corp and BullionStar will greatly benefit from the shift of gold investors from Hong Kong to Singapore.
Global gold outlook
The world is currently full of negative-yielding debt, and as a result, safe-haven assets such as gold are increasingly becoming attractive. Strategists have pointed out that the price of gold could hit $2,000 per pounce shortly. Last week gold futures were around $1,513.80 per ounce, and since breaking above the $1,300, the price has continued to grow. According to TD Securities strategist Daniel Ghali, currently there is a long position to trade on, and gold is aiming higher for now. There is a possibility that in the coming years when the unconventional policy becomes a reality, gold could hit $2,000.
Over the years, easy and unconventional monetary policy from central banks has led to a shortage of safe-haven assets such as gold which has led to the growing pile of negative-yielding debt. This has led to an increase in demand and thus pushing the price of the precious metal higher. The reason for gold is trading in negative yields is because supply is lower than demand in the current market.
The world is expected to consume close to 4,370 tonnes of gold in 2019. This is the highest consumption since 2015 and up from last year’s 4,364 tonnes according to Metal Focus. Gold Focus predicted that gold prices this year were to be around $1,310 an ounce up from $1,268 reported in 2018 and highest in six years.
Metal focus indicates that gold demand for jewelry is to increase by 3% this year to around 2,351 tonnes. This will mainly be driven by a 3% and 7% increase in demand from China and India, which are the world’s largest gold markets. This will compensate for the decline in demand in the Middle East.
Metal Focus has also predicted that official purchases which jumped 75% last year following the addition of gold to their reserves will slip 9% this year to 600 tonnes. Global physical demand for gold will be unchanged at 1,082 tonnes.
Gold outlook in Singapore
Singapore is also enjoying the upsides of the growing demand for gold that has seen global prices surge in recent weeks. The country’s strategic position in Asia where India and China, who are the largest consumers are located continues to enjoy the goodies of growing demand. Rhona O’Connell the market analysis head at EMEA predicts that bullion may hit $1,400 this year.
Currently, safe-haven assets are on demand because of global economic uncertainties. Gold has seen a revival in recent weeks after a lackluster performance in the past few months as investors gear up for slowing economic growth. The ongoing trade tensions between China and the US could also be working in favor of safe-haven assets and has pushed their demand higher. With civil unrest in Hong Kong disrupting businesses, there Singapore is growing to become a destination for investors. There are risk elements in the outlook of the economy like the possibility of a recession, which has enhanced demand for gold.