Gold’s first weekly gain in seven weeks
Gold prices have remained disappointing since April 2018 mainly due to a tighter monetary policy outlook as well as the stronger US dollar (UUP). The SPDR Gold Shares (GLD) has declined by 11.4% since its 2018 peak in April. It has mostly been on a unidirectional decline since April. For the week ended August 24, 2018, however, gold prices settled with a weekly gain of 1.8% after six consecutive weeks of decline.
Fed’s dovish leaning
While the US dollar was already under pressure due to President Trump’s criticism of the Fed’s interest rate hikes as well as political uncertainty in the US, the most recent speech by Fed chair Jerome Powell was slightly dovish (TLT), which led to a further slump in the dollar and a surge in gold. Last week, the US Dollar Index slipped 0.9%, which was its worst weekly performance since February 2018.
Powell’s comments were preceded by St. Louis Fed president James Bullard’s interview with CNBC, in which he said, “If it was just me, I’d stand pat where we are and I’d try to react to data as it comes in.” He added, “I just don’t see much inflation pressure…I’m an inflation hawk, but I just don’t see that developing…I just don’t think this is a situation where we have to be pre-emptive.”
There are so many variables impacting gold prices (IAU) that it is difficult to predict its outlook with significant certainty. However, in the next parts of this series, we’ll look at the key factors impacting gold prices. Based on the outlook of these factors, we’ll see how gold prices could progress going forward. Let’s discuss the outlook for the dollar in the next part of this series.