Gold Prices Up as Uncertainty Hits the Markets

Gold prices were up on Monday supported by political uncertainty after President Trump signed two executive orders suspending entry to the US for immigrants from seven countries. Upcoming elections in Europe as well as a weaker dollar also impacted prices.
While US stocks fell on Monday, investors turned to precious metals, favoring haven assets due to the increasing uncertainty worldwide. Gold spot prices were slightly up at $1,195.18 an ounce as of 15:00 p.m EST.
“Gold’s future direction will depend on the dollar, U.S. monetary policy and long-term interest rates,” said Commerzbank analyst Carsten Fritsch.
“The immigration ban added to risk-off sentiment and boosted gold earlier … There is also political risk coming up in the form of elections in France and the Netherlands,” he added.

On Friday, Trump’s executive orders suspended travel to the United States from Syria, Iraq, Iran and four other countries on the grounds of national security.
Edward Meir, independent commodity consultant at INTL FCStone, said: “[The] dollar will likely continue to weaken given that the currency markets are still in the process of discounting a rather bumpy start to Donald Trump’s presidency, which by all accounts, shows little sign of stabilizing.”

Upcoming Fed Meeting

This week’s Federal Reserve meeting and labor market report due on Friday have traders expectant on how these could drive the US dollar and impact the precious metal market.
The Fed raised interest rates in December and at that time signaled as many as three rises in 2017. Higher rates could mean a higher U.S. currency, which makes dollar-denominated gold more expensive for holders of other currencies, potentially slowing demand.
Analysts remain cautious about the precious metal future as uncertainty rises. World Bank senior economist John Baffes told Reuters on Thursday that precious metals are likely to fall and Societe Generale cut its gold price forecast to $1,150 per ounce from $1,300 per ounce for 2017.
But Julius Baer analysts said: “We maintain a cautious view on gold, taking into consideration the expectation of an improving growth outlook, rising interest rates and a strengthening dollar,
“That said, we acknowledge the upside risks related to recent actions taken by President Trump, such as the immigration ban. Should he become the feared ‘unguided missile’, uncertainties would increase, fostering safe-haven demand and pushing gold prices significantly higher.”
Others are still bullish about the yellow metal this year. Frank Giustra, CEO of Fiore Financial Corporation, said: “I think that we’re in the beginnings of a new bull market in metals, but I am really mostly bullish about gold.”
Louis James, of Casey Research, is also very bullish on gold and said: “If Donald Trump continues to be Donald Trump, then I think that it is a good thing for gold.”

US Economic Growth

The market for the precious metal has also been supported by data released on Friday that showed that US economic growth slowed sharply in the fourth quarter of 2016. Last year the economy expanded only 1.6 percent, the worst performance since 2011.
Although uncertainty over the Trump administration’s trade policy and a sustained dollar strength pose a risk to the economy, some forecasts remain positive.
What’s more another report showed that consumer sentiment hit a 13-year high this month, while consumer spending increased 3.8 percent in 2016 after a 3.5 percent rise in 2015.
“The economy is continuing to chug along in the slow lane,” said Stuart Hoffman, chief economist at PNC Financial Services Group Inc. in Pittsburgh. “Consumer spending was fairly solid. We’re at a turning point on the upside for business investment. Based on the economy and on the policies we’re likely to see, growth is going to speed up this year.”
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Securities Disclosure: I, Priscila Barrera, hold no direct investment interest in any company mentioned in this article.