Gold prices jumped 17% in 2019 driven by strong demand

Gold prices rose by around 17 percent in 2019, driven by strong demand and uncertainty in global economy. The price one gram of 22 carat gold increased by around QR26 in 2019, denting the ability of consumers to buy the precious metal.

Gold started the year on firm footing with the precious metal trading at QR150 per gram on January 1, 2019. After going through volatility throughout the year due to global factors, gold ended at QR176 per gram on December 31 last year.  One gram of 24 carat gold was trading at QR160 at the beginning of the year while it ended the year at QR186.

“Although gold prices moved up in 2019, it did not discourage customers to buy gold. May and June were the best months in terms of sales. Gold demand shot up in these months because of Ramadan and Eid Al Fitr,” Marketing Manager of a jewellery showroom told The Peninsula. “Customers who buy jewellery are not much sensitive to price rise. They do not try to wait for price fall to buy jewellery. On the contrary, customers buying gold bars are very sensitive to price fluctuations. They try to time their purchase according variation in gold prices because they buy gold as an investment. Such customers do not buy when gold prices are on the rise,” he added.

The demand of gold was also high during the last quarter of previous year, he added. Interest rates in the US, value of dollar and trade tensions between the US and China were the main factors that impacted gold prices in 2019.

Gold prices were supported by higher expectations of an interest rate cut by the US Federal Reserve, a breakdown in trade negotiations between the United States and China, and strong demand from emerging market central banks.

Prices of the yellow metal acquired an upward trend in May, following US tariff hikes on $200bn worth of Chinese goods. Prices also came under pressure due to additional demand created by some major central banks. In the first quarter of 2019, gold demand from central banks, especially China, India, Turkey, and Russia, increased by 68 percent year-on-year.

Gold prices have also shot up significantly recently due to geopolitical tensions. One gram of Gold was trading at QR176 on January 1 this year but the prices moved up in a matter of few days to QR182 in last week due to geopolitical tensions.

Gold prices are expected to remain firm this year due to low interest rates in the US and weakness in dollar. A weaker dollar fuels demand for gold by making it cheaper for holders of other currencies, while lower bond yields reduce the opportunity cost of owning non-yielding bullion. Gold is highly sensitive to the rising interest rates because they push up bond yields and tend to boost the dollar.

Source from: The Peninsula