Gold Edges Higher as the Fed’s Gloomy Outlook Hints at More Low Rates
At time of writing, the gold price in AUD is hovering just above the $2,500 level at $2,520.
You can see how the last 24 hours played out in the wake of the Dow Jones shedding nearly 7% overnight:
We take a quick look at what drove this rise in the gold price.
AUD runs into resistance, Fed paints grim picture
You can see the AUD ran into resistance at 70 cents, something we flagged was on the cards last week.
Meanwhile, the Fed chairman Jerome Powell broke the news after its Wednesday meeting.
The central bank indicated that unemployment would still be 5.5% at the end of 2022 and fall to 4.1% in the long-term.
He said, ‘We have to be honest that it’s a long road… it’s – depending on how you count it – well more than 20 million people displaced in the labour market.’
These projections build the case for sustained zero or near zero interest rates.
In turn, with markets facing a sharp sell-off, the appeal of gold may have risen as the go-to risk-off play.
Where does the gold price go from here?
The Fed also forecasted US GDP at negative 6.5% for the year and unemployment above 9% by the New Year.
All of this could point to gold pushing beyond the $2,700 mark at some point in the coming year, should the bad news keep rolling in.
The US–China trade war shows no sign of waning, civil unrest is still rife in the US, and markets are looking increasingly shaky.
If you want our editor Shae’s Russell’s outlook for gold and monetary policy 2020 you can get that right here.
It’s a compelling read.
For The Daily Reckoning Australia