Gold In 2019: 'The Best House In A Bad Neighborhood' - Pepperstone
(Kitco News) - Investing in gold next year might be one of the “best” options out there, as the U.S. economy and the U.S. dollar could be looking at taking a step back, according to Australia’s leading forex broker Pepperstone.
“If you take your money out of dollars, where do you go?” asked the firm’s head of research Chris Weston during an interview with Bloomberg on Wednesday. “At the moment, we are seeing a really weak picture developing in Europe as well. Do I want to go out and buy euros? Absolutely not.”
Weston warned that there is a small possibility of a technical recession in Germany if the 25% auto tariffs kick in.
When it comes to the British pound, Weston said he prefers not to guess what will happen with Brexit in March and rather wait it out.
The Australian dollar also did not seem like a great investment for Weston. “In Australia, we've got housing issues.”
Out of all the major forex options out there, none seem to be as good as the precious metals option, he pointed out.
“Do we go and buy gold? It is the best of the rest,” Weston explained. “It’s the best house in perhaps a bad neighborhood next year. That to me is where the trade will be. Gold is probably going to be one that shines out.”
Gold has a good set-up going into 2019, as the U.S. economy and the U.S. dollar could be looking at a slowdown next year, according to Pepperstone.
“Growth expectations are too high in the U.S., inflation expectations are too high. And I think once we start seeing leading indicators pull back, then you are going to see the dollar coming under pressure,” Weston added.
#Gold prices could rise back to $1,350 an ounce in 2019 as the U.S. #economy peaks, says @natixis | #kitconews #gold #silver #finance #economics #preciousmetals #markets #mining | https://t.co/AqGiappIPP— Kitco NEWS (@KitcoNewsNOW) November 28, 2018
On top of that, there is the U.S. employment situation to keep a close eye on for investors, which could trigger a major U.S. dollar sell-off. Next year, the Fed expects employment to go down to 3.5%, which is a full 100 basis points below full employment in the U.S., Weston said.
“If you look at their long-term projects of employment at 4.5%, one suspects next year they may start targeting the unemployment rate to reduce the output gap. If we start seeing unemployment in the U.S. going up, that’s your cue to sell the U.S. dollar in a bigger way,” Weston added.