Last week, gold fell ahead of first-quarter earnings season as the dollar gained while the precious metal slumped to its lowest level of the month. Gold fell 1.23 percent at the close of Thursday’s trading session to settle at a price of $1.295.15. Nonetheless, analysts maintain that this is only a temporary setback.
“This drop is the largest since the first half of 2016, which proved a strong catalyst for gold prices,” said Maxwell Gold, director of investment strategy at Aberdeen Standard Investments.
The drop in the precious metal comes even as headwinds facing the dollar loom. Last month, the Fed elected to keep rates unchanged last month, holding its policy rate in a range between 2.25 percent and 2.5 percent.
In addition, the central bank alluded to no more rate hikes for the rest of 2019 after initially forecasting two. The capital markets initially expected rates to remain steady after the central bank spoke in more dovish tones following the fourth and final rate hike for 2018 last December.
Of course, less hikes and a rate cut would translate to dollar weakness–an open path for strength in gold. Other headwinds include increasing concerns of slowing global economic growth, which could spur a move to safe havens like gold.
However, according to the minutes published at its last Federal Open Market Committee meeting, the Federal Reserve did leave open the possibility of possible rate hikes this year if the economic data suggests warranting such a move. This, of course, wouldn’t bode well for gold.
“The minutes confirmed that if the economic data continue to support the economy, a rate hike could be on the table at the back end of this year. Luckily for the dollar bears, this wasn’t the majority view, at least, not for the time being,” said Naeem Aslam, analyst at ThinkMarkets.
In the video below, long-term, gold’s reliability as a currency should drive its value up, says Claude Beget, keynote speaker of the Swiss Mining Institute.
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