International Gold market is passing through a very unstable period as too many factors affecting the market. This unstable period has improved the gold demand in the market.Gold prices in USA started the week at $ 1206/ounce and ended the week at $ 1229/ounce.In contrast to international market,Gold prices in Pakistan lost some ground during the week.Gold prices in Pakistan started the week at Rs 50200/tola and ended the week at Rs 50000/tola. Following are the most important factors affecting the gold prices in Pakistan and gold prices in USA .
Falling US Dollar
Gold prices in USA rose after the US dollar falling trend started last week.US dollar reached its 5-week low after interest rate rise was announced by the Federal reserve.The US dollar index started the week at 101.28 points and ended the week at 100.11.This means that US dollar lost 1.15 % value during the week.There are lots of reasons behind weak dollar.The confusing economic policy of the trump administration has created uncertainty in the market as investors are not clear about his future economic policy.Economic experts like Tom Kendall of ICBC Standard Bank believe that trump’s failure to push for his promised economic package has created uncertainty and has increased the demand of safe haven assets like gold in the market.
US and Global Economic Outlook
US economic outlook is relatively week as compared to last year as trump administration has failed to announce any substantial package for the economy. According to the latest OECD report, U.S. GDP growth is expected to hit just 2.8 percent in 2018, down from a November estimate of 3 %.
Currently,Gold prices in USA are following a see saw path .Falling dollar and unclear policy of the trump administration will further improve the short run demand of the Gold. While,long term gold demand will be influenced by the future federal reserve monetary policy and global political & economic environment.
Economic analysts are expecting a Brexit like referendum in these two countries after elections. Brexit like referendums will create instability in the European market and that can really increase the demand of safe haven assets like gold in next 6-12 months.
There is also uncertainty over the expected US government spending.The trump administration is planning to make some changes in the infrastructural spending on different governmental expenditures such as Affordable Care Act.The confusing behavior by the trump administration is really creating uncertainty in the US political and financial environment.
Economic experts believe that gold prices in USA can reach $ 1140/ounce in the second quarter of the current year.The aggressive monetary policy of the Federal reserve will further put pressure on the gold prices in USA as it will also decrease the demand of gold in market.So this means that long term outlook of the gold market is not so encouraging. Whereas,short term outlook of the gold market is little better as US dollar has seen a great fall in the last week.Short run investors can maximize their gains through using day trading strategies in the gold market.These strategies will help them earn some short term gains.