Gold Ends 2018 Down 2%, But Sees Best Month Since Jan ‘17
February gold futures last traded at $1,283 an ounce, unchanged on the day and slightly down from its highest level since June. However, for the year, gold is ending with a loss, the first since 2015.
According to some commodity analysts gold has significantly benefited from shifting U.S. interest rate expectations. The CME FedWatch Tool showed that one month ago markets were pricing at least one-rate hike in 2019. Heading into the new year, markets are now pricing only an 11% chance of a rate hike.
“[gold’s] good performance is the expectations of less Fed rate hikes,” said George Gero, managing director with RBC Wealth Management. Market. “The price of gold is a barometer of economic and political well being of our times.”
Although gold has strong upside momentum, some analysts are warning investors to not expect prices to rally in a straight line.
Bill Baruch, president of Blue Line Futures said that the yellow metal could see some selling pressure as price push closer to $1,300 an ounce.
“As Gold treks near the psychological $1,300 mark, it will have a tough time pushing through here without a fresh catalyst or outright U.S Dollar weakness,” he said in a note to clients. “We believe it is important to capitalize on strength and maintain that traders should lock in some gains here if they have followed our bullish bias over the last 90 days.”
For many Banks, $1,300 represents the high watermark for gold next year. Although a lot of banks are bullish on the yellow metal next year, many are expecting any rally to be a grind higher. The biggest hurdle for the yellow metal remains the U.S. Dollar.
The greenback is ending the year on a strong note, with the U.S. Dollar Index up more than 4% on the year. However, there are some currency analysts who see an end to the dollar’s run this year.
In a recent interview with Kitco News, Simon Derrick, chief currency strategist at Bank of New York Mellon, said he expects a weaker U.S. economy and weaker equity markets to weigh on the U.S. dollar.