Gold to benefit from economic uncertainty, rise in price in 2019
Baku, Azerbaijan, Dec.18
By Leman Zeynalova – Trend:
Gold prices are expected to rise to $1,300 per ounce by end-2019, Trend reports citing Capital Economics, the UK-based consulting company.
“Gold set to benefit from economic uncertainty and an early end to Fed tightening. Our view that there will be only two more rate hikes in the first half of 2019 and that the Fed will start to loosen policy in 2020 is good news for the price of gold,” said a report released by Capital Economics.
What’s more, lower equity prices and US bond yields should give a fillip to safe-haven demand, according to the company. “As such, we expect that the price of gold will rise to $1,300 per ounce by end-2019.”
The company believes that in general, slower global economic growth will prove too much of a headwind for most commodity prices in 2019.
“What’s more, investor sentiment towards risky assets more generally is likely to deteriorate. These negative developments will more than offset any positive impact on prices of a somewhat softer US dollar.This time last year, we predicted that 2018 would be another good year for the world economy, although we did caution that China’s economy would enter a weaker patch. Indeed, this was the main reason we were bearish on the prospects for industrial metals prices this year,” reads the report.
Looking ahead, the UK-based company predicts that the macroeconomic backdrop is set to deteriorate.
“There are now clear signs that growth in China’s economy is slackening. Admittedly, the authorities are loosening policy but we think this will only be sufficient to stabilize the economy in mid-2019. At the same time, we see growth in the US economy slowing sharply in the second half of 2019 and have downgraded the outlook for the euro-zone in recent months,” said the report.
The double whammy of slower growth in both the US and China, the two largest single consumers of metals, suggests little upside for metal prices in 2019, said Capital Economics. “Of course, some of the negative news has already been priced in, given the 17% fall in the S&P GSCI Industrial Metals index this year.”
But the company experts think that falling equity prices and persistent trade tensions next year will add to negative sentiment in the metals markets.
“Although we are bearish on the metals sector, we are less negative on the prospects for copper prices, which we expect to hold up rather better, largely owing to constrained supply. Our forecast is that the price of copper will stand at $6,250 per ton, close to today’s level of $6,123,” the report reads.
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