Goldcore analyst feels gold is in the clear after these news.
Gold moved ahead to score its best finish in a month after the European Central Bank made a major update to its policy reports Marketwatch. Despite an increase in optimism regarding economic data, the bank has continued with its crisis-oriented policy of buying around $35 billion in bonds a month.
The quantitative easing began in 2015 and has seen the ECB purchase over $2 trillion of bonds in a bid to move inflation upwards and closer to its target. But a recent statement saw the bank pledge to cut down its QE by half in the coming months before finally ending the program as 2018 comes to a close.
According to the article, the ECB also promised to keep interest rates low through 2019 as the markets wind down. In contrast, the Fed’s Wednesday meeting resulted in another basis point increase, as well as an update to their initial rate hike forecast for the year. The Fed now expects to raise rates four times this year, up from three.
Although the change in forecast resulted in an immediate strengthening of the dollar, gold was nonetheless able to perform impressively. Brien Lundin, editor of Gold Newsletter, sees this as a highly bullish sign for the metal moving forward. Lundin believes that the rise in the dollar index was a temporary respite, and that the greenback will soon start trending lower again, giving gold more room to grow.
Mark O’Byrne, research director at GoldCore in Dublin, said that gold prices could go up as the Fed’s latest meeting sinks in. O’Byrne pointed out that recent announcements from the central bank resulted in gold briefly dipping before moving up.
The analyst also feels that gold is in the clear after these news and that prices should now be decided by other factors. As market participants move their attention to gold’s strong fundamentals, such as mounting geopolitical risks, the metal could see further gains in the near future says the article.
The article also states that the state of trade relations between the U.S. and China will be another important indicator of where gold goes from here. On Friday, the White House went ahead with its plans to impose tariffs on Chinese goods, adding a 25% levy on an estimated $50 billion of Chinese imports. China wasted little time responding in kind and announced its own 25% tariff on $50 billion of U.S. goods soon after the White House announcement. In their response, China also urged other countries to retaliate in a similar manner against President Trump’s decisions.
Peter Hug, global trading director at Kitco Metals, highlighted the importance of these trade conflicts for gold. Hug said that gold only needs a slight nudge past its current levels to generate enough momentum for sustained price gains.