Gold bars on display. Picture: BLOOMBERG
Gold bars on display. Picture: BLOOMBERG

The gold price surged above the $1,400/oz level on Friday — the first time it has broken that barrier since September 2013 — as demand for the precious metal soars on rising geopolitical uncertainty.

The precious metal has now climbed to an all-time high in 72 currencies, including the rand, and more gains could be in store as investors seek safe-haven assets, analysts said.

“Gold is now unfettered and has the ability to go higher,” said Ross Norman, CEO at London-based bullion dealer Sharps Pixley, adding that the precious metal may be in store for a period of consolidation in the short term.

Gold not only pushed past $1,400/oz, but broke through $1,360/oz, a level it had struggled to exceed since 2014. There was a clear shift in who was buying gold, with high levels of interest from institutional investors.

“This is some indication that wealthier investors are beginning to believe the outlook for the global equity market is darkening, and that the equity bull market is looking tired,” Norman said.

“Gold has benefited from its safe-haven status amid a deteriorating macroeconomic outlook,” analysts at Melbourne-based ANZ Banking Group said in a report published on Friday.

“We believe it will remain a highly relevant portfolio diversifier, as investors seek protection from growing uncertainties around global economic growth and rising geopolitical risks.”

Prices will probably remain above $1,400/oz, and gold has a “reasonable chance” of breaking the $1,500/oz mark over the next 12 months, ANZ said.

Gold has benefited from expected interest rate cuts in the US and rising geopolitical tensions. Trade spats between the US and its major trading partners are said to be weighing on the global economy, while tensions are lifting in the Middle East.

Following attacks on tanker ships in the region last week, a US drone was shot down allegedly by an Iranian missile on Thursday. According to media reports, US President Donald Trump approved strikes on Iran shortly afterwards, but then backed down on that plan.

Gold touched a high of $1,411.82 overnight on Friday, but edged back below $1,400/oz. As the JSE closed gold was 0.35% up at $1,393.20/oz.

Gold’s surge since the end of May has boosted JSE-listed gold miners, which have risen nearly 39% so far in 2019, versus a 12% increase in the JSE’s all-share index.

ANZ said the key risk to its bullish outlook for gold was a US-China trade deal.

“This would significantly reduce the risks to the global economy and lower rates by central banks. However, this is not our base case, with tensions likely to remain for the foreseeable future,” the group said.

Trump and his Chinese counterpart Xi Jinping are due to meet at the Group of 20 summit next week to discuss trade matters.

The JSE gold index added 0.25% on Friday and 1.12% for the week - the fifth week of gains. DRD Gold added 9.07% last week and Harmony 2.85%. The gold index is up 40.27% so far in 2019, compared to a 12.21% rise in the all share.

hedleyn@businesslive.co.za