Gold’s April Forecast: Trump, Fed, French Election in Focus
As gold was largely unchanged during the Asian session on Monday, analysts outlined their April projections for the yellow metal, with $1,250-$1,280 levels dominating the discussion.
Gold prices will depend on the overall safe-haven demand in April, according to a number of analysts. Things to keep a close eye on this month include progress of the Trump administration or lack thereof, Federal Reserve commentary around interest rate hikes, and the first round of French elections.
“Apart from Fed commentary, a main driver for gold in April is safe-haven demand,” Vivek Dhar, commodity strategist at CBA, told Kitco News. “Gold can be lifted further in April if the U.S. economic growth targets and expectations disappoint. We’ve already seen a bit of that with Obamacare not being repealed.”
Dhar linked his forecast largely to the U.S. interest rates. “The correlation that we find closest is the U.S. 10-year yield. It is difficult to see gold prices finding a lot of support in that environment.”
But, in order to get a better estimate of where gold might be heading, critical political environment must be considered, noted Dhar. “The more we see right-wing ideology, the more gold prices rise. French elections in April can definitely spark that additional safe-haven demand flow.”
At this point markets are not prepared for the French hard-right leader Marine Le Pen to win. If she does better than expected, gold will benefit, Dhar explained.
INTL FCStone analyst Edward Meir also stated that market volatility is a given towards the end of April, when the results of the first round of French elections start to come in.
Meir expects gold prices to hit fresh highs ahead of the election, but then fade in the immediate aftermath.
“We have been generally constructive on gold for some time now and continue to maintain this view going into April. During [the month], we see prices trading between $1195-$1280,” Meir said in a note. “Although far-right candidate Marine Le Pen is expected to do well, we suspect the size of her victory will fall short of what the polls are expecting, as we do not think that the large block of the undecided French voters will come down on her side.”
Another aspect to keep in mind when speculating on the short-term gold price moves, is the investigation into the suspected links between Russia and the Trump campaign, Dhar pointed out. “If the links are proven, it could boost gold prices,” he said.
Key level to watch on the upside is $1,250, according to Dhar. “It would be interesting to see how sustainable the breach past that level could be, given the interest rate cycle in the U.S.,” he noted. “On the downside, there is $1,200-$1,175, but I don’t expect the prices to go there. Gold is likely to trade sideways until we get a clear sign in terms of the U.S. yields. For the next six months, risks are tilted on the downside for prices.”