In 2018, gold had a mixed year.
After rising to a high of $1363, the price started to decline. It reached the
yearly low of $1163 in October. Since then, gold has been paring those losses
and in February, it reached a high of $1345.
The decline in the price in 2018
was mostly because of the Federal Reserve. At the time, the Fed was issuing
hawkish statements, which made many to believe that four more rate hikes were
possible this year. Starting from October, investors started pricing-in fewer
rates this year because the US economy was showing signs of weakening.
This year, the central bank has
been largely dovish. The recent statements by the officials indicate that there
may not be a rate hike this year. Some in the market are also speculating that
the Fed is likely to lower interest rates this year or in the coming year.
There are reasons to believe this. This is because the economy is showing signs
of weakening and the many investigations going on about Trump could unravel
this year. In addition, the coming year is an election year, which could affect
the US economy.
When trying to find the value of
gold, traders tend to place important value on its relationship with the USD.
This is simply because gold is usually quoted in dollar terms. As such, when the
dollar increases, gold tends to fall as well. Another reason is that the US is
the biggest economy in the world and it has the biggest gold reserves. The
country has more than 8965 metric tons of gold, which are valued at almost $400
billion. Therefore, any signs that the economy is weakening is usually viewed
as being positive for the markets.
Gold is trading along the $1300
levels, which is slightly lower than February’s high of $1346. Regardless, the
XAU/USD pair appears to be in an upward trend that has more room to run. This
is confirmed by the fact that the pair is along the 61.8% Fibonacci Retracement
level. Therefore, there is a possibility that the price is merely a pullback,
which could recover in the coming days.
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