Gold News: Interest Rate Hike Key Wildcard For Gold Prices
Gold News
The timing of the first US interest rate hike in nearly a decade remains the “key wildcard” for gold’s outlook, as investors are unsure of when rates will finally be raised. After dropping the word patient from its outlook during the last Federal Reserve meeting, speculation was that interest rates remained on track to be raised in June, but this is now far from certain. Disappointing economic data over the last couple of weeks mean the US economic recovery might have hit a snag, and the Fed now might wait to raise interest rates until later this year, if in 2015 at all.
US jobs grew at its slowest pace in over a year in March, sending gold to a seven-week high on April 6th. The poor economic data raised speculation that the Fed might wait to increase interest rates, which is bullish for the precious metal. The dollar has benefitted from the anticipation of a US interest rate hike. The belief that the Fed might wait to raise interest rates has caused the value of the dollar to lose some ground, leading investors to make bullish bets on the yellow metal. Gold, which is priced in dollars, becomes less expensive to foreign investors when the US currency falls.
The US is expected to release a variety of important economic figures this week, including industrial production and manufacturing data. These reports will be important for the short-term outlook for gold, as weak reports further bolstering the perception that the US economic recovery is faltering will send prices higher. While investors tend to shun the commodity when interest rates increase since it does not pay interest, gold could increase to its highest level in over two months if the economic data points to the Fed not raising interest rates in June.
