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FXTM: softer U.S. dollar lends some support to gold

Kitco News

Editor's Note: 2020 is expected to be another year of significant uncertainty and turmoil. But the question is what asset will emerge the victor when the dust settles from the global trade war, Brexit, recession threats, negative bond yields. It's a showdown of global proportions, so don't miss all our exclusive coverage on how these factors could impact your 2020 investment decisions.

Gold remains underpinned by a U.S. dollar that “seems to be out of love as we approach the new year,” said Lukman Otunuga, senior research analystwith FXTM. The analyst commented that the dollar index is down by more than 1% from last week’s high and 2.9% from its 2019 peak. “In a classic risk-on environment, gold prices tend to fall but not this time,” Otunuga said. “The precious metal is trading at two-month highs today, mainly driven by the weakness in the greenback.” Otunuga also commented that gold has been supported by the U.S. airstrikes carried out in Iraq and Syria against Iranian-backed groups. “If geopolitical tensions increase in the Middle East, there will be more reasons for investors to increase their allocation in gold; otherwise the gold rally makes little sense while equities are making record highs,” the analyst said. Otunuga later added: “Given that we are in holiday season, expect to see some exaggerated moves in currencies and commodities. Flash crashes also can’t be ruled out when liquidity is thin.” Shortly after 8:10 a.m. EST, Comex February gold was $1.30 higher at $1,512.10 an ounce.

By Allen Sykora of Kitco News;


BBH: U.S. economy rolling along, avoiding recession

Monday December 30, 2019 08:17

The U.S. economy is doing better than anticipated in the fourth quarter, avoiding recession and making further interest-rate cuts unnecessary, said Brown Brothers Harriman. Analysts pointed out that the Atlanta Federal Reserve GDPNow model now estimates October-December growth in gross domestic product at a seasonally adjusted annual rate of 2.3%, up from 2.1% previously. “Elsewhere, the NY Fed's Nowcast model now has Q4 growth at 1.19% SAAR, down from 1.32% previously,” BBH continued. “It also raised its estimate for Q1 growth to 1.51% SAAR from 1.64% previously. The Atlanta Fed is likely overstating growth a bit and the NY Fed understating it, and we suspect the truth is somewhere in between. Either way, we are far from recession and the Fed is right to pause for now to assess the landscape. Because we are upbeat on the U.S. outlook, we do not see further easing in 2020.”

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