Gold’s Long-Term Outlook Is Upbeat despite Short-Term Headwinds


Jan. 28 2019, Updated 9:01 a.m. ET

Gold’s bright outlook

As we’ve discussed in the previous parts of this series, most analysts and market participants believe that gold (GLD) (NUGT) has a brighter outlook in the long term, as the macro environment for gold remains supportive. Due to the recovery in US equities (DIA) at the beginning of 2019, gold prices have come under pressure. However, for the rest of 2019, there are many factors that should support gold.

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Heightened geopolitical concerns

Geopolitical concerns are expected to remain heightened throughout 2019. The Brexit uncertainty is increasing day by day, adding to the global geopolitical volatility. Currently, the US government shutdown is weighing on investors’ minds. The trade talks between the US (SPY) (VTI) and China (FXI) are still showing no signs of reaching a definitive agreement by the deadline of March 2. As 2020 elections draw near, the geopolitical uncertainty is only expected to rise.

Fed and other factors

The Fed’s rate hikes were one of the key reasons for gold’s negative performance in 2018. However, Fed Chair Jerome Powell has assured markets that the Fed will be more patient regarding hikes in 2019, which should lift a lot of pressure off of gold to compete with the interest-yielding assets. Moreover, as the relative gap between interest rates in the US and the rest of the world declines, the US dollar could also come under pressure, benefitting gold.

The earnings and margin deceleration for US stocks remains a concern. Moreover, as volatility is rising and earnings and margin prospects are weakening, future gains for equities could be limited.

You can also read Which Five Gold Stocks Are Analysts Loving So Far in 2019? for analysts’ favorite gold picks.


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