Gold price continued to gain around after hitting a six-month high as investors remained concerned about the political uncertainty in the United States and global economic slowdown.
— Gold price continued to gain around after hitting a six-month high as investors remained concerned about the political uncertainty in the United States and global economic slowdown.
Spot gold climbed 0.3 percent to $1,271.85 per ounce as at 0429 GMT. In early trade it hit $1272.56, the highest since June 20. Also U.S. gold futures were up 0.3 percent at $1,275.8 per ounce.
Risk Appetite Wanes amid Political Uncertainty and a Weakening Economy
The US Senate adjourned on Saturday without breaking an impasse over President Donald Trump’s demand for more funds for a border wall with Mexico. According to a senior official, the shutdown could continue until Jan. 3.
Apart from signs of political instability in the United States, a weakening global economy further boosted demand for gold.
The IMF downgraded its forecast for world economic growth again. In its most recent report published in October, the fund forecast global growth of 3.7 percent for 2018 and 2019. These estimates were 0.2 percentage points below July estimates. With global markets on shaky ground and the growth slowing down in Europe and Asia, the outlook for 2019 is murkier. For global investors, hedging risk will most likelybe the main strategy.
Net long positions among speculators and the holdings of the SPDR Gold Trust, the world's largest gold-backed exchange-traded fund increased, which indicates bolstered interest in gold.
Net long positions in Comex gold increased to a six-month high in the week to Dec. 18, while holdings of the SPDR rose to their highest since mid-August on Friday.
USD No Longer a Safe Haven
In the meantime, the dollar was pressured amid concerns that the U.S. Federal Reserve will keep raising rates into a weakening economy.
“The prospect of full-blown trade war between the US and China will definitely damage the US and its trade partners. As the sentiment of protectionism rises, the outlook for USD is under risk.” Said Thomas Huang, founder and CEO of GramGold Coin (GGC), a cryptocurrencythat aims to help people invest in gold.
“Looking from the other angle, the US dollar will not go up significantly because a rising USD is not in the best interest of the US or global economy as the Trump government is trying to reduce US trade deficit and sustain the economic growth.” Huang added.
Central banks around the world have been increasing their gold reserves, seeking to reduce their exposure to US dollar.
IMF statistics show that since 2008's fourth quarter, the People's Bank of China has increased its gold reserves to 1,843 metric tons, up from just 600 tons 10 years ago. Similarly, the Bank of Russia's gold ownership has gone from 520 metric tons in 2008 to 2, 036 tons now.
“All the above said, the prospect of USD in the coming months doesn’t look so positive and it will be very challenging for it to remain its safe haven status.” Huang said.
New Ways of Investing in Gold in a Risk-Averse Market
With investors’ risk appetite wanes, there have emerged new ways of investing in gold. One of them is through investing in gold-backed stablecoins.
On Nov. 27th, Bloomberg published an article titled Where to Invest$1 Million Right Now. Amongst the experts surveyed, one suggested the profit to be found in a gold-backed stablecoin.
Stablecoinsaim to maintain their worth better by being redeemable for something else of tangible value, like regular fiat currencies such as US dollars, or gold. Each stablecoin comes with its underlying asset – which means the monetary value that investors expect it to trade at. These assets would normally be deposited with a trusted bank
“Investing in gold via a gold-backed stablecoin will provide stability, flexibility, and a peace of mind for investors,” said Huang.
According to Huang, GGC takes a different approach as a stablecoin. It was launched without an ICO (Initial Coin Offering). Instead, it had an Initial Coin Circulation (ICC). Every GGC token is backed by one gram of gold presented by a vault statement via a smart contract. The gold vaults are independently run by GGC’s partners. The gold reserve is 100% insured by Chubb Limited, a Swiss industrial and personal insurer. The gold is audited on monthly basis and everyone can have access to the live audit.
GGC was founded by a team of seasoned professional in the financial industry that have went through several global economic recessions including the 2008 financial crisis. Founder and CEO Thomas Huang has over 23 years of experience in investment banking, risk management, wealth management and quantitative trading with UBS and China Development Industrial Bank globally.
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