Look For Gold To Shine As Trump Calls For QE4, Fed To Lower Rates - Analysts
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(Kitco News) - Although gold demand has been lackluster of late as investors jump back into equity markets, some analysts noted that investors should not give up on the yellow metal as it should find continued support from dovish U.S. monetary policy.
Friday, the Federal Reserve was hit with more political pressure as President Donald Trump continued to criticize the central bank’s monetary policy. In a statement to reporters, Trump said that the Federal Reserve should be cutting interest rates and implementing quantitative easing measures
“I think they should drop rates,” Trump said. “I think they really slowed us down. There’s no inflation. It terms of quantitative tightening, it should actually now be quantitative easing.”
Bill Baruch, president of Blue Line Futures, said that Trump’s comments underline why investors should continue to look for buying opportunity in the gold market.
Putting the political pressure aside, Baruch said that it will be difficult for the Fed to resist cutting interest rates later this year as global economic weakness weighs on the U.S. economy.
“I think there is a base case for owning gold this year and next year as rates go lower not higher,” he said. “You are going to need to see a drastic fundamental shift in global economic growth to get yields back above 3% and that is just not going to happen.”
Baruch added that he continues to recommend buying gold on dips as long as prices remain above $1,280 an ounce.
Chantelle Schieven head of research at Murenbeeld & Co, said that she thinks Trump’s comments on the Federal Reserve and monetary policy, are good for gold because it adds to the environment of geopolitical uncertainty.
She added that the comments were “ridiculous,” particularly after the U.S. sold solid job growth in March.
“Trump’s comments is going to blurs the lines between monetary policy and politics,” she said.
Regardless of Trump’s comments, Schieven said that investors can’t ignore the growing anticipation of a rate cut later this year. Currently the CME FedWatchTool is pricing in a more than 50% chance of a rate hike by the end of the year.
Schieven said that these growing expectations will continue to support gold prices in the long-term.
Trump’s comments, also aren’t playing well in the Twittervers. Many analysts have been quick to point out his previous comments on quantitative easing. Peter Schiff, CEO of Euro Pacific Capital has been particularly vocal about Trump’s latest comments.
In the early days of QE Trump correctly criticized the reckless policy as a mistake. As a candidate for President he called out the Fed for doing political things to artificially boost the Obama economy and warned of the dire long-term consequences. Now he is calling for QE4!— Peter Schiff (@PeterSchiff) April 5, 2019
I think Trump's call for more QE, despite his past criticism, is more than just hypocrisy. Trump knows that if the Fed waits for a recession to go back to QE he loses in 2020. So he wants the Fed to act preemptively, hoping to postpone the recession until after he is reelected.— Peter Schiff (@PeterSchiff) April 5, 2019