Weak U.S. Domestic Growth Needed To Push Gold Price To $1,400 - Analyst

March 7, 2019

New York (Mar 7)  The U.S. dollar and U.S. interest rates remain the key headwinds to gold prices as the yellow metal tries to find momentum after dropping from last month’s 10-month high.

Although gold needs a dovish fed to push higher, Jim Iuorio, managing director at TJM Institutional Services, wrote in a commentary for the CME Group that the reason behind low interest rates will key for prices to push towards $1,400 an ounce.

“If the Fed’s change of heart is caused by problems in Asia or in Europe, the dollar could maintain its strength in a lower rate environment because its value is primarily measured against the yen and the euro,” he said.

However, if the Fed keeps interest rates low because of domestic growth concerns, that could be enough to propel gold higher.

“Additionally, if the domestic weakness appears that it may persist and require long-term central bank intervention, gold could swiftly shift to the ‘gotta have it’ asset of 2019,” he said.

Another side-effect of weak economic growth could be panic selling in equity markets, which would also benefit gold, Iuorio said.

The gold market is currently digesting a significant economic downgrade from the European Central Bank, which prompted it to loosen monetary policy.

According to the latest ECB staff projections, Eurozone gross domestic product will increase by 1.1% this year, 1.6% in 2020 and 1.5% in 2021, compared to December’s forecast of 1.7% growth in 2019, 1.7% in 2020 and 1.5% in 2021.

At the same time, the central banks sees consumer prices increasing 1.2% in 2019, 1.5% in 2020 and 1.6% in 2021, compared to the previous estimates of 1.6% inflation this year, 1.7% in 2020 and 1.8% in 2021.

April gold futures last traded at $1,286.10 an ounce, down 0.12% on the day.


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