Gold rose 4.8 per cent in January to hit a seven-year high on Friday, as investors sought out the safe-haven asset amid the coronavirus outbreak, a trend that will support its price this year, analysts said. Even after a retreat this week, it was up 4 per cent year to date on Wednesday.
Internationally, gold traded at US$1,557.80 an ounce on Wednesday, having hit US$1,589.8 on Friday, its strongest level since April 2013. Its year-to-date rise follows an 18 per cent rally in 2019 as a whole.
In Hong Kong, the precious metal rose on the first trading day of the Year of the Rat to its best lunar year debut since 2016. The local gold market closed at HK$14,535 (US$1,871) a tael, or 37.9 grams, an increase of 0.9 per cent over its close on Friday, January 24, the last trading day of the Year of the Pig, the previous lunar year according to the Chinese calendar. On Wednesday, it traded at HK$14,420 per tael.
The rally comes amid an outbreak that has claimed almost 500 lives – including the first coronavirus-related death in Hong Kong – and infected more than 24,000 people. The outbreak has spooked investors, who have plunged stock markets to record lows at the start of the lunar year in mainland China and Hong Kong.
Demand for gold tends to drop after the Lunar New Year holiday as seasonal demand fades, but this year, a different picture is emerging, Suki Cooper, precious metals analyst at Standard Chartered bank’s New York branch, said in a recent research report.
“Buying tends to ease once the Lunar New Year holiday commences. However, this year prices have remained elevated, with gold benefiting alongside other safe-haven assets amid coronavirus fears,” she said. “While we do not believe overall investor positioning is overcrowded in gold … We continue to see sustained upside risk to gold prices in the second half of 2020.”
The Shanghai Composite Index kicked off the Year of the Rat by falling 8.5 per cent at the open on Monday, before closing 7.7 per cent lower for its biggest single-day decline since August 2015. The markets in mainland China were shut for an additional two days because of the outbreak.
In Hong Kong, where the Hang Seng Index kicked off the new lunar year on Wednesday, the benchmark fell 3 per cent for its worst open since the Year of the Monkey in 2016.