By Andy Wong
Gold has broken out of the range it was in since late 2013. While it retreated after the Group of 20 summit, it is too early to conclude that trade and other disruptions are behind us.
Instead, geopolitical uncertainties and market disruptions are the new norm. At the same time, economic growth looks tepid. Given this backdrop, central banks have embarked on another easing cycle. Gold is an effective hedge and a good component of robust portfolio construction in this environment.
After a lacklustre six years, gold prices made a breakthrough and hit US$1,439 an ounce on June 25, breaking out of the range of US$1,050 to US$1,375 an ounce it had been in since late 2013.
Despite the sharp rise, our technical work shows that gold is not overbought. Albeit retreating to around US$1,380 an ounce as US-China trade tensions temporarily subsided, the yellow metal is set to enter a new bull market.
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