Gold prices rising, but new discovery could drastically drop bullion value

December 27, 2018 12:24 pm


Gold is relishing its role as a safe haven in the face of global market uncertainty, despite a recent surge in risk appetite spurred on by an easing of fears in the US as the Dow surges 1000 points and oil rebounded by 10% on Wednesday, and US-China trade tensions relax.

But the future of Gold looks bleak, at least price wise, after a new discovery is giving Copper Gold-like features, which experts say will diminish the role of bullion in industrial manufacturing, and ultimately lower its price.

But first, the appetite for Gold today is rising.

Market research FXTM: Outlook for Gold in Q1, 2019

Gold is shining

CNBC reports that Gold rose on Thursday as global growth worries and volatility in stock markets boosted demand for the safe-haven metal, but gains were capped by a sharp rebound in equities.

Spot gold rose 0.4% to $1,271.85 per ounce by 0102 GMT. In the previous session, the metal hit $1,279.06 an ounce, its highest since June 19, according to Reuters.

U.S. gold futures inched up 0.1% to $1,273.9 per ounce

“Gold prices are primarily getting support on the back of safe-haven buying due to concerns about the health of the global economy and heightened volatility in risk assets,” said Sugandha Sachdeva, vice president of metals, energy, and currency research at Religare Broking Ltd.

However, upbeat U.S. data and signs of easing trade tensions between Washington and Beijing limited demand for the metal, according to CNBC.

A U.S. trade team will travel to Beijing the week of Jan. 7 to hold talks with Chinese officials.

Wall Street witnessed the Dow Jones Industrial Average rocketing more than 1,000 points for the first time on Wednesday.

CNBC reported oil surging on Wednesday with both U.S. and Brent crude rising about 8% with WTI trading near $47 a barrel and Brent trading above $55 a barrel.

Read: UAE markets aim to join market rally from US-China trade truce

Still, Gold managed to gain despite sentiment improvement across the board.

“Gold has been tracking steadily higher through December,” traders at MKS PAMP said in a note.

SPDR Gold Trust, the world’s largest gold-backed exchange-traded fund, said its holdings rose 2.05% to 790.02 tonnes on Wednesday from 774.14 tonnes on Monday, indicating improved investor appetite for gold.

Bloomberg said Bullion climbed as much as 0.5% on Wednesday, extending last week’s gain and on course for the biggest monthly advance since January 2017.

Money managers are the most bullish on prices they’ve been in half a year, Bloomberg says.

Gold is up 4.3% so far this month, following smaller gains in October and November.

Read UAE: Impact of VAT on sales of gold and diamonds to be reduced

Is Copper the new Gold?

According to Business Insider, a team of Chinese researchers has turned cheap copper into a new material “almost identical” to gold, according to a study published on Saturday in the peer-reviewed journal Science Advances.

“The discovery could significantly reduce the use of rare, expensive metals in factories,” the authors said, referring to components of electronic devices, for instance, which contain a large amount of gold, silver, and platinum.

According to BI, estimates show about 40 smartphones can contain as much gold as a ton of ore.

The new material cannot be used to make fake gold pennies, because its density remains the same as ordinary copper, but while regular copper tends to react more easily when combining with other chemicals, a new method can inject a large amount of energy into copper atoms and made the electrons more dense and stable, allowing it to resist high temperatures, oxidisation, and erosion, according to the researchers.

It is “like a warrior with golden armor in a battlefield, capable of withstanding any enemy assault,” they said.

CCN, a crypto industry site, said the research found that the nanoparticles “achieved catalytic performance extremely similar to that of gold or silver.”

CCN asked: Will Bitcoin Replace Gold as Store of Value?

Image by CCN: Bitcoin price (blue) vs. gold price (orange) over the past five years.

Read: Cash-, gold-backed tokens for Islamic investors in X8 currency 

“This scientific development raises the question of whether the gold standard of economic hedging could soon lose its luster, forcing gold bugs and other stock market bears to turn to alternative assets, creating an opening for Bitcoin to become a mainstream store of value,” says CCN.

CCN adds that anticipating future improvements in the methodology, ordinary retail investors who purchase precious metals for speculative purposes could be taken in by this pseudo-gold if significant quantities ever exit the industrial sector and are repurposed by counterfeiters.

“Moreover, even the production of this pseudo-gold for its intended purpose — industrial applications — could have a significant impact on the value of the true yellow metal,” says CCN.

“At the very least, the material’s replacement in industrial manufacturing should place equivalent downward pressure on the gold price, though it’s likely that psychological factors would further weaken investor confidence and steepen the asset’s decline.”

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Hadi Khatib
By Hadi Khatib
Hadi Khatib is a business editor with more than 15 years' experience delivering news and copy of relevance to a wide range of audiences. If newsworthy and actionable, you will find this editor interested in hearing about your sector developments and writing about it.



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