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IMF raises growth forecasts for 2020 in latest global economic report

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(Kitco News) - The global economic outlook looks slightly better than expected as the International Monetary Fund (IMF) raises its growth forecasts for this year and next.

Tuesday, in its World Economic Outlook, the IMF said that it sees the global economy contracting 4.4% this year, up slightly higher from its June forecast for a contraction of 5.2%.

Although the IMF is more optimistic about global growth, it also warned that recovery would be “long, uneven and uncertain.”

Although the IMF has upgraded its outlook for this year, it sees slightly less growth in 2021. The IMF sees the global economy expanding 5.2% next year, down slightly from its June forecast for 5.4% growth.

“We are projecting a somewhat less severe though still deep recession in 2020, relative to our June forecast,” the IMF’s Chief Economist Gita Gopinath said in the report.

Gopinath said some $12 trillion in fiscal support and unprecedented monetary easing from governments and central banks helped to limit the damage caused by the COVID-19 pandemic.

Looking at the impact of the ongoing coronavirus, the IMF said that social distancing due to the coronavirus pandemic will continue into 2021. The report added that local transmissions will fall everywhere by the end of 2022.

The United States economy is set to fall by 4.3% this year, much better than the 8% contraction predicted in June; meanwhile, the euro zone’s economy is expected to contract by 8.3% in 2020, an improvement from a 10.2% contraction forecasted in June.

Commodity analysts appear to be mixed on what impact the economic revisions will have on gold prices.

Some analysts have noted the upward economic revisions will lower gold’s appeal as a safe-haven asset. However, other analysts have said that gold will continue to do well as the Federal Reserve is not expected to raise interest rates anytime soon even as the U.S. and global economies improve.

The analysts note that this scenario would see inflation pressures rise and reduce real interest rates, a positive environment for gold.

The gold market is seeing some renewed selling pressure in reaction to the latest IMF data. December gold futures last traded at $1,914.70 an ounce down 0.74% on the day.

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