Gold breaks out
Published on 20.02.2019 22:48

Gold just got another reason to cheer after the latst minutes meeting from the US Federal reserve where the tone left many analysts predicting that the Fed is done with raising interest rates this year.

This is good news for the precious metal as the US dollar is expected to take a hit on the expectations of lower interest rates and gold looks certain to be a beneficiary.

Although gold is known as a safe haven, there are many reasons why investors choose to own it, and a lot of that demand comes from emerging markets and is set to rise as the local currencies become stronger against the greenback

“While primarily seen as a safe haven, gold is highly exposed to the emerging markets, which make up more than half of its global demand,” said Carsten Menke, commodities research analyst at Julius Baer.

“An improving economic backdrop in the emerging markets and strengthening local currencies versus the U.S. dollar bode well for gold demand. This is particularly true for China, where gold demand had been lackluster for the past few years as consumers became increasingly concerned about the outlook for the economy,” he added.

Not only content to keep rates on hold, some say that the Fed will actually start pumping money into the system in order to help the economy which will cause an array of issues such as runuway inflation anf gold looks set to benefit from theis situation as well

“The Fed is preparing us for a return to QE at some point relatively soon. Many of the analysts I respect on this matter concur that this will create rampant inflation for a country that cannot suffer a dramatic rise in interest rates or yields to curb prices without risking collapse” said Global Pro Traders CEO David Brady

“This is the perfect environment for Gold, and whether these policies come sooner or later, the more people believe them to be inevitable within the next year or two, the further Gold will rise,” he added.


Andrew Masters

Analyst

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