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Gold Prices Rise Despite Fed’s Signals on Neutrality

CommoditiesDec 11, 2018 11:45PM ET
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Investing.com - Gold prices climbed on Wednesday morning in Asia, despite indications that the Federal Reserve might be more dovish on interest rates.

Gold Futures for February delivery rose 0.18% to $1,250.55 at 11:37 PM ET (03:37 GMT) on the Comex exchange, while the U.S. dollar index, tracking the greenback against a basket of six currencies, weakened 0.01% to 97.38.

Silver Futures for March delivery also inched up 0.42% to $14.713.

“We are in a situation where the U.S. Federal Reserve is starting to signal they may be very close to neutrality, which means just a few more interest rate hikes,” Bart Melek, head of commodity strategies at TD Securities told Reuters.

The Fed’s Governor Lael Brainard said last Friday that risks are increasing overseas and in the corporate debt domestics markets. She said that the interest rate hike “has served us well by giving us time to assess the effects of policy as we have proceeded,” but “the policy path increasingly will depend on how the outlook evolves,” according to Reuters.

Lowered expectations on rates hike usually shift demand for safe-haven assets like the precious metal to the U.S. dollar or other stocks. Bullish gold markets might be seeing the impact of a more gloomy outlook on global markets next year.

UBS and the Bank of America Merrill Lynch (NYSE:BAC) published forecast reports of the markets in 2019 last week, and both banks are predicting slower economic growth in 2019.

“Our outlook is that the U.S. growth will be constrained by ebbing fiscal stimulus and higher interest rates. In the Eurozone, solid domestic demand will not be sufficient to offset reduced export growth. China, meanwhile, faces the twin pressures of U.S. tariffs and economic rebalancing,” the UBS report said.

The Bank of America Merrill Lynch had bullish forecasts for cash and commodities next year.

“Earnings growth is expected to decline sharply next year, from over 15% to less than 5% on a year-over-year basis. The team is bearish stocks, bonds, and the U.S. dollar; bullish cash and commodities; and long on volatility,” it said in a report.

Gold Prices Rise Despite Fed’s Signals on Neutrality
 

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Cristian Chibato
Cristian Chibato Dec 12, 2018 7:01AM ET
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What do you mean gold prices rise DESPITE dovishness? Are you completely ignorant to the dynamic between interest rates and gold?
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