The price of gold is currently trading at session lows as the European Union’s euro weakened against the United States dollar. The drop in the euro comes after a statement by the President of the European Central Bank, Mario Draghi. He used his statement to highlight the growing risks within the region towards inflation and economic growth. The economic uncertainties pushed the euro back and raised the value of the United States dollar.
“The risks surrounding the euro area growth outlook can still be assessed as broadly balanced,” he said in his opening statement. “However, the balance of risks is moving to the downside owing to the persistence of uncertainties related to geopolitical factors, the threat of protectionism, vulnerabilities in emerging markets and financial market volatility.”
These comments by the President of the ECB created some weaknesses in the euro, leading to a crash in the prices against the United States Dollar. This ultimately resulted in a stronger United States dollar index that has pushed investors away from gold. Gold futures for February were trading at $1,245.6 on Thursday, almost 0.35 percent down from the last session value.
Meanwhile, analysts from TD Securities believe that gold might need more definite signs to extend the recent gains that it has made in the market. The comments were made in line with the meeting of the United States Federal Reserve, being held on the 18th of this month. The meeting would decide the fate of interest rate hikes in the United States, and how the Fed plans to go about hikes in the year 2019. It is also expected that the Fed might decide on a rate hike during the meeting, in which case the opportunity cost of holding gold over yielding assets might increase. Investors might, hence, shift their attention towards assets.
”Considering that the Fed is casting a long shadow with its meeting next week, we expect that the FX [foreign-exchange] environment will remain benign for now,” TDS says. “That being said, risks of triggering significant shifts in CTA [Commodity Trading Adviser] flows have eroded in the near term, suggesting that precious metals could need to a catalyst for the time being. We think that the complex may need more certainty that the Fed will not move towards restrictive policy next year before prices move substantially higher.”
Gold to be Investment Safe Haven for 2019
While the market is currently full of speculations for the year 2019, we are also seeing some prominent analysts comment on how gold will perform during the year. Phil Streible, who is a strategist at RJO Futures, believes that investors do well if they hold on to gold as a safe asset.
“Even if you look at bonds and interest rates, the volatility has been quite high in there. We’ve seen bonds tick up three, four, five handles within a short period of time. I think that gold has been a much better, a much more stable investment asset for a safe haven,” Streible mentioned recently.