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Gold Looks Good In 2020 But Not Now - Capital Economics

Kitco News

(Kitco News) - Gold and silver markets could be two of the few commodities to survive an impending global economic slowdown in the next few years, according to one U.K. research firm.

Although analysts at Capital Economics have little hope for gold prices this year, as the yellow metal continues to fight against rising U.S. interest rates, the firm reiterated its long-term forecast as it sees prices pushing to $1,400 an ounce by the end of 2020.

"Our macro-economic forecasts are not painting a rosy picture for commodities in 2019. We expect softer growth in China, a slowdown in the US economy and minimal growth in emerging markets," the analysts said in a recent report. "Our forecast of a sharp fall in US equities next year could spur an exodus from risky assets, including commodities. The exception to this is gold, which could benefit from a move into safe havens."

For gold and silver, the research firm said that a weaker U.S. economy in 2019 and 2020 will eventually force the Federal Reserve to reverse course on monetary policy, ending the current tightening cycle.

Starting next year, the analysts said that they see a cap in the U.S. dollar strength and a peak in U.S. bond yields.

"This should give gold prices a further fillip as it will encourage more safe-haven demand and portfolio diversification," the analysts said.

The comments come as gold prices have seen renewed momentum as equities suffer their worst monthly decline in years. While down from its recent 3-month high, the yellow metal is still holding on to strong gains. December gold futures last traded at $1,232.60 an ounce, up 0.12% on the day.

So far this month, gold prices are up 3%, while the Dow Jones Industrial Average is down almost 6% and the S&P 500 is down more than 7%.

However, in the near-term Capital Economics said that it is expecting gold's new rally to fizzle out as the Federal Reserve's December monetary policy meeting quickly approaches.

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