Weaker Economic Growth To Weigh On Dollar, Boost Gold - Natixis
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(Kitco News) - Weaker U.S. economic growth, weighing down the U.S. dollar, will ultimately drive gold prices to $1,400 an ounce by the end of the year, according to analyst at Natixis.
In his latest research report, Bernard Dahdah, precious metals analyst at the French Bank, reiterated his bullish forecast for gold prices to average the year around $1,330 an ounce and averaging 2020 around $1,395 an ounce.
The biggest factor to drive gold prices, along with other commodities, is a weaker U.S. dollar, Dahdah said.
Although the risks of an outright recession remain low, economists at Natixis expect nominal global GDP to expand 2.5% this year; at the same time the U.S. economy is expected to grow 2.4%.
“It promises to be a tricky year, with multiple risk factors (i.e. trade war) still prevalent that could prove disruptive,” Dahdah said. “Uncertainty is the only certainty.”
Along with slowing economic growth, Dahdah said that an end to the Federal Reserve rate hike cycle and the growing U.S. budget deficit should also weigh on the U.S. dollar, driving gold prices higher.
“The impact of the tax cut is starting to turn negative, with the budget deficit widening to -4.4% from -3.5%,” he said.
Dahdah’s comments come as renewed momentum in the gold market tries to push prices through critical psychological $1,300 an ounce. April gold futures last traded at $1,297.70 an ounce, up 0.51% on the day.
Although Dahdah is optimistic on gold prices for the year, he noted that the market is not without its risks.
“The biggest downward risk facing gold is the amount held in physically backed ETFs, which is almost equal to the annual production of the metal," he said. "Should investment sentiment turn against gold, we could see large amounts of gold being sold. Back in 2013, 850 tonnes were sold, which contributed sharply to the collapse in gold prices.”