Gold prices in the recent couple of months show a downward trend, which is surprising as increased geopolitical turmoil moves up the prices and makes the yellow metal a safe haven for the investors. The turmoil includes the ongoing unrest in Syria, and the political tension between Iran and the US. While gold prices were recently up slightly as the dollar softened, the potential trade war that US has sparked with Mexico, Canada, and Europe is one factor for lifting up prices. Meanwhile, the fate of the metal rests on the upcoming monetary policy meetings: one by the Fed and the other by the ECB.
Mind you that it is a popular opinion that interest rate hikes have a bearish effect on gold prices. So in case of rate hike, gold prices come under pressure. In the current scenario, U.S. economy is growing steadily, and the Fed will announce its latest interest rate decision on Wednesday. Those who are very hawkish about the possibility of rates hike(s) believe so because rising inflation along with a growing economy will keep the Fed on track to continue raising interest rates once a quarter till 2019. An increase in rate by the Fed would mean further control in gold price rally.
The European Central Bank will announce its latest policy decision on Thursday. While no change in interest rates is anticipated, gold prices have upside chances as in case of hawkish statements or even monetary tightening, pressure on gold will be offset largely by strengthening of Euro, dragging of USD and thus lifting of gold prices.
So where does gold go from here? The central bank decisions together with the geopolitical uncertainty will eventually decide price trend.
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