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Hurdles Falling Away On Gold’s Path To Higher Prices - Perth Mint

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(Kitco News) - Investors can expect to see an increase in demand for gold as the Federal Reserve is no longer a barrier for higher prices, according to one executive with the Perth Mint.

In a telephone interview with Kitco News, Jerry Hicks, sales and business manager at the Perth Mint, said that he expects the latest Federal Reserve monetary policy decision to continue to drive gold prices higher through 2019. Hicks’ comments come as the gold prices rally nearly 1% in reaction to the Federal Reserve’s latest monetary policy meeting. April gold futures last traded at $1,312.50 an ounce, up 0.84% on the day.

On Wednesday, the U.S. central bank lowered is growth and interest-rate outlook for 2019. In its updated economic projections, the central bank indicated that it does not expect to raise interest rates at all this year, a sharp contrast from December’s forecast, which saw two rate hikes this year.

At the same time, the Fed said it sees the U.S. economy growing by 2.1% this year, down from its previous estimate of 2.3%.

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“It’s not just interest rates, it’s unlikely the U.S. dollar will continue to strengthen following the Federal Reserve’s latest comments, and that is another hurdle the gold market has jumped,” Hicks said.

However, Hicks added that the higher gold prices are a doubled-edged sword. Although investor demand for gold-backed exchange traded funds is expected to pick up, Hicks added that physical demand could slow because of higher prices.

“If gold is going to go higher because of a weaker U.S. dollar and low interests rates, then physical investors might want to think getting on board the gold train now so they don’t get priced out the market,” he said.

While the Perth Mint could see slower coins sales due to higher prices, it also expects to see strong growth in its newly launched gold-backed ETF (NYSE: AAAU). The Pert Mint Physical Gold ETF is the only product with the backing of a sovereign government.

Of course, the path to higher prices is still not an easy one, Hicks warned. While optimism is rising for stronger gold prices, he said that equity markets could be the next hurdle the gold market faces.

Although loose monetary policies support gold, they also are positive for equity markets. However, Hicks added that the central bank’s growth downgrade could present a problem for equity markets, which could support the yellow metal.

“Gold is sometimes called the misery metal because what’s bad for the person on the street is often good for gold,” he said. “But I like to look at gold more as an insurance policy. We have insurance for our cars and our homes, so why not have insurance for your portfolio to get you through those difficult periods?”

Disclaimer: The views expressed in this article are those of the author and may not reflect those of Kitco Metals Inc. The author has made every effort to ensure accuracy of information provided; however, neither Kitco Metals Inc. nor the author can guarantee such accuracy. This article is strictly for informational purposes only. It is not a solicitation to make any exchange in commodities, securities or other financial instruments. Kitco Metals Inc. and the author of this article do not accept culpability for losses and/ or damages arising from the use of this publication.