Gold prices have been in the news again. Summer 2019 kicked off some exciting momentum for gold and expectations for the rest of the year are even more optimistic, even while economic reports and news from the U.S. Fed continue to undermine breakout in prices. Gold hit $1,422 on June 25, a six-year high and a very promising sign for anyone with an interest in bullion.
Revised Expectations
Back in January, the general consensus among banks and analysts who follow precious metals was that optimistically, gold prices would reach $1,500 by the end of the 2019. More conservative estimates claimed that it would likely stay in the $1,400 to $1,500 band. Given that prices ended 2018 at $1,300, it was a positive but restrained outlook.
Now that the metal has already broken $1,400, albeit with a retreat, some are now revising their expectations to $2,000 an ounce by the end of the year, which would be some of the highest prices ever. It’s a bullish opinion, but many are looking at the increasing evidence that financial markets are on the brink of collapse. Until they do, precious metal movements will remain reserved, but once recession strikes, everyone knows what to expect of commodities trading.
A Growing Economy
The Fed’s interest rates plan always plays a role in investors’ outlook for gold. As a general rule, high interest means lower gold prices, as bonds gain the potential to produce higher earning. But Fed Chair Jerome Powell apparently caved in to presidential pressure, ignoring strong economic growth and cut interest rates instead, sending investors flocking toward gold.
One major counter-push to a gold price breakout is the strength of the economy. Only days before that happened, a jobs report showed that the U.S. had added an incredible 224,000 jobs in June, well above the predicted 160,000 jobs and adding steam to what is already the largest period of economic expansion on record. Everyone is waiting for the moment when things slow down, but the economy continues to defy expectations.
What that Means for Gold Prices
Given price movements movement, the window for buying at optimal prices is starting to close, but it’s been given a bit of an extension. High interest rates mean better returns on financial products (unless they’re rising to combat high inflation, a situation in which negative interest rates push bullion higher). If bonds can reliably produce better results than metal, it’s where investors prefer to seat their cash.
The growing economy can only last for so long. The same strategists who believe the $2,000 mark could be reached this year see the U.S.’s ongoing trade wars as part of a wider global conflict that will eventually catch up with equity markets.
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If the recent economic news has shown anything, it’s that no one knows when this unprecedented period of economic expansion is going to come to a close. When it does, expect to see gold prices rise dramatically as investors flee an uncertain equities market and a future that no one can predict.
