As the year closes out, gold is expected to receive a significant boost according to some analysts on the back of a weaker US economy which may cause a pullback in world stock markets and see gold once again regain its popularity as a safe haven.
The precious metal did suffer a setback yesterday by falling below the psychological $1500 mark but this is seen as temporary and a rebound is in the making
“A sell-off in equities by year-end is likely, In such a scenario, we would expect a significant increase in safe-haven demand for gold and a material increase in speculative demand for gold, triggered by a decline in the dollar and U.S. real rates. This would push gold spot prices strongly higher” said analysts from Orchid Research
After hiking interest rates 3 times since July of this year, the US Federal Reserve struck a fairly neutral tone last week which lead the market to believe that the Fed may be done with their rate hiking cycle. During his press conference following the central bank’s latest monetary policy meeting, Federal Reserve Chair Jerome Powell noted that the US central bank would need to see a “significant” move up in inflation before they considered another rate hike.
This is seen as as a further boost to gold as lower interest rates in the US reduces the appeal of the US dollar as an interest-bearing asset and therefore boosts gold’s prospects.
“That message has really set the tone for a long-term gold rally. The Federal Reserve has basically said that no matter how good the economic data gets, they won’t be raising interest rates. That is good for gold.” Said Adam Button, managing director at Forexlive.
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