Hawkish views coming from the US Federal Reserve, alongside a strengthening US dollar, contributed to this week’s fall in gold prices, commented VanEck active gold strategies portfolio manager Joe Foster.
“Despite recent events, our view hasn’t changed that gold is in the early stages of a long-term bull market,” Foster said.
Mr Foster said gold prices were likely to be supported by the weak global economy, noting that regardless of the Federal Reserve’s rate decision in December, gold prices have the potential to appreciate.
“A Fed rate hike could work against gold initially - stronger dollar - but in practice could be seen as a misstep that increases the risk of recession and financial stress. In addition, it creates imbalances if the Fed is tightening policy when every other central bank is easing,” he said.
“If the Fed fails to raise rates in December we expect dollar weakness and the gold price to strengthen.”
Mr Foster drew comparisons between the current economic climate and the conditions that supported the 2008 – 2011 gold bull market, noting that much like today, this was “a period of heightened financial risk due to unconventional central bank policies”.
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