GOLD PRICE FORECAST: BULLISH
- Gold prices[1] held up by low yields, underlying unease about market outlook
- Fed outlook in focus as Powell testifies in Congress, CPI data is published
- Baseline price support seen holding, with surprise risk tilted to the upside
Gold prices have held up in a narrow $1536-1612/oz range since the beginning of the year even as other benchmark assets gyrated with swings in underlying sentiment. This probably speaks to two sources of baseline support.
First, interest rates around the world are ultra-low relative to historical averages, and there is seemingly little scope for them to rise in the near term. That means the opportunity cost of owning a non-interest-bearing asset like the yellow metal is comparatively low.
Second, while the initial frenzy triggered discrete risks like military escalation between the US and Iran or the Wuhan coronavirus outbreak has ebbed, an underlying sense of unease and uncertainty remains[2]. Economic growth is recovering but has a long way to go before 2018 peaks are in sight.
Meanwhile, assorted risks like the US presidential election and the lingering possibility of a no-deal Brexit continue to stew in the background even as central banks fret about their depleted firepower. The ECB tellingly launched a comprehensive review of its mandate, for example.
POWELL TESTIMONY, US CPI DATA TO SHAPE FED POLICY OUTLOOK
The outlook for US monetary policy is likely to command the spotlight in the week ahead. A steady stream of scheduled commentary from FOMC[3] officials will be headlined by Fed Chair Jerome Powell. He is due on Capitol Hill for his semiannual testimony before committees of the House and Senate.
Mr Powell seems likely to reassert the Fed’s preferred no-change posture for the remainder of the year. A
