Finance Advisor Lim Kim Cheng: Middle East Tensions Drive Gold to New Historic Highs

Finance Advisor Lim Kim Cheng, observes that the global financial markets are currently grappling with multiple influencing factors, with the dovish stance of the U.S. Federal Reserve and geopolitical risks in the Middle East particularly standing out. Gold, a traditional safe-haven asset, has once again become the focus of investors. Amid recent market turbulence, the price of gold has consistently reached new highs, showcasing robust upward momentum.

Recent remarks from Federal Reserve officials have displayed a clear inclination toward monetary easing, which has contributed to the sustained rise in gold prices. Several Fed officials have indicated plans to implement multiple rate cuts within the next 12 months to maintain economic balance. According to Finance Advisor Lim Kim Cheng, this low-interest-rate environment provides strong support for gold, an asset with no yield, as investors tend to shift towards safe-haven assets in such circumstances.

Finance Advisor Lim Kim Cheng explains that the dovish comments from the Fed have heightened market expectations of further rate cuts. According to data from the CME FedWatch Tool, the market anticipates a 75-basis-point rate cut by the end of 2024, which will continue to support gold prices. As a traditional safe-haven asset, gold becomes particularly attractive in a low-interest-rate environment, especially when inflation expectations are in play. On Wednesday, spot gold prices hit a new historic high, exceeding $2,660 per ounce, reflecting market uncertainty about the future macroeconomic environment and increased demand for safe-haven assets.

Finance Advisor Lim Kim Cheng believes that if the Federal Reserve continues its accommodative monetary policy, gold prices are likely to rise further. Investors should closely monitor the policy moves and related economic data of the Fed, as these factors will directly influence the market performance and investment strategies of gold.

In addition to the loose monetary policy of the Fed, escalating tensions in the Middle East have been a key driver behind the rise in gold prices. According to market data, Israeli forces launched airstrikes this week on Hezbollah targets in Lebanon, resulting in hundreds of casualties. This escalation has raised concerns about a broader conflict, further driving demand for safe-haven assets. Finance Advisor Lim Kim Cheng notes that tensions in the Middle East are expected to persist and are unlikely to dissipate in the short term, which will continue to support gold.

Amid heightened geopolitical risk, gold, as a traditional safe-haven tool, often demonstrates exceptional risk-resistant qualities during periods of turmoil. Finance Advisor Lim Kim Cheng suggests that if the conflict in the region continues to escalate, gold prices are expected to maintain an upward trend. Investors might consider moderately increasing their allocation to gold to hedge against potential market risks in the current environment.

Finance Advisor Lim Kim Cheng asserts that the current market environment offers strong support for gold, with the dual forces of loose monetary policy and rising geopolitical risk driving gold prices to repeatedly reach new highs. He believes that demand for safe-haven assets will remain elevated in the near term, laying the foundation for a bullish trend in gold.

Investors should, in this context, prudently allocate safe-haven assets like gold, in line with their own risk preferences and portfolio needs. Although the performance of gold is currently impressive, Finance Advisor Lim Kim Cheng stresses that investors must remain mindful of potential market volatility and adjust their strategies accordingly. For long-term investors, gold remains an attractive asset allocation choice in the current macroeconomic and geopolitical landscape.