Dubai is going for gold despite continuing trade wars and Brexit uncertainty

Recent figures indicate a rosy future for trading in Dubai, with businesses there citing a positive outlook for quarter three of 2019, as they anticipate an upturn in the market. Despite a drop in hiring sentiment, challenges around competition, and a dip in demand due to Ramadan, Dubai’s quarterly index demonstrated a bullish outlook, with new projects and export markets set to drive economic growth forward, and trading becoming a major beneficiary.

As Dubai prepares to host the 2020 Expo under the theme of ‘Connecting minds, creating futures’ this global event is already having a great positive impact on the economy for Dubai and the United Arab Emirates. With preparations already well underway, the 2020 Expo will welcome 200 participants from 192 countries, providing a fantastic chance to showcase innovation. With the sub-themes being ‘opportunity, mobility, sustainability’ the event is all about encouraging collaboration between countries, while still considering the long-term impact on both the planet and humanity.

Concerns about the trade wars between China and the US are also a major factor impacting on Dubai’s economy, potentially pushing up the value of gold to levels not seen for some time. Analysts are expecting gold prices to increase further as trade tensions continue. FXTM’s Chief Market Strategist, Hussein Sayed, predicts gold prices could increase beyond $1,600 by the end of 2019. He also went on to say that gold is potentially a safer investment than bonds in the current climate, as bonds are currently impacted by a significant increase in negative yielding debt.

Continuing uncertainty over Brexit in the UK is impacting gold values too, with investors possibly seeing the precious metal as a safer haven to protect investments against fluctuating and unpredictable markets. Saxo Bank’s head of commodity strategy, Ole Hansen, echoed this view, saying the strength of the dollar could pose a challenge, but it is unlikely we will see any adjustment in long positions, provided gold retains a value of over $1,490 per ounce.

Meanwhile oil prices are also benefiting from the current economic climate, particularly in light of the alleged drone attack on the Brent Crude oil plant, which sent the value soaring by 20%. This represented the largest rise in value for 28 years, and the biggest impact on global oil supplies since the 1979 Islamic Revolution, when Iranian oil output was lost.

Damien Courvalin, Goldman’s commodity strategist, has predicted four possible outcomes for crude oil prices, depending on how long the outage lasts.

• A short outage lasting a week or so could see a small price fluctuation of around $3-$5 a barrel
• A slightly longer outage of between 4-6 weeks might bring about an increase of $5-$14 a barrel, depending on the length of outage
• If the outage lasts for over 6 weeks, prices could rise over $75 a barrel
• An outage of 4 months or longer could possibly bring about a rise to over $75 a barrel.

According to reports in oilprice.com we may even see prices exceed $80 a barrel. While we undoubtedly live in a time of seismic global political and economic shift, ETFs such as oil and gold could benefit from the fallout, potentially presenting opportunities. Investors who are willing to ride out the storm may reap the rewards in future.

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