With stock indexes being volatile and witnessing a major price correction, the precious metal should have made a strong comeback. And, the same is historically proven that every time there is a market crash, Gold prices soar but there seems to be more to the story this time around with contribution from other factors. The China's economy is slowing down, along with Germany and parts of the European Union majorly because of the Brexit impact. Crude oil has not picked up despite an agreed production cut by OPEC members, one would expect interest of the investors in the gold market and that certainly is the case too but with the dollar being so strong, all the prospects of a hike in Gold have been dampened. And, it's going to take a major news story to bring the price of gold back in favour with investors.
Gold is often sensitive to movements in the dollar. The dollar rose to a 19-month high after data showed U.S. consumer spending appeared to gather pace while industrial production rebounded in November. Gold fell to its lowest level in almost two weeks on Friday as robust U.S. economic data boosted the U.S. currency. Gold futures settled down 0.41% at $1,242.30 on the New York Mercantile Exchange late Friday, after falling as low as $1,236.50 earlier. For the week, gold was down 0.89%. The gold prices rose to a five-month peak of $1,250.55 an ounce on Monday last week, but has given up all the gains as the dollar strengthened against a basket of major currencies.
So, what’s going to happen next?
Well, in a major development scheduled to take place this week, the precious metals traders will be focusing on the Federal Reserve monetary policy meeting for its impact on the U.S. dollar on Wednesday, which heavily influences gold’s performance. The Fed is widely expected to deliver a quarter point interest rate hike at its meeting and will also update its economic projections and the dot plot of interest rate projections. Concerns about the outlook for global growth along with trade tensions and market volatility have prompted traders to push back expectations on the expected pace of Fed rate hikes in 2019. And with the Fed rate hike next week, any gold price rise will be hampered by expected dollar strength as per some precious metal experts.
During the last few days, the Gold prices have remained steady on uncertainty over Fed policy outlook and as a word of caution, our analysts advise that it would be wise to hold on to your urge of investing in Gold until the position gets more clear in the Federal Reserve monetary policy meeting this Wednesday.
But as investors you need to keep in mind that everything that glitters is not gold. Here's a performance summary of some major gold stocks listed on ASX during Oct'18 month till date:
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