Best of the Week
Most Popular
1. Stock Markets and the History Chart of the End of the World (With Presidential Cycles) - 28th Aug 20
2.Google, Apple, Amazon, Facebook... AI Tech Stocks Buying Levels and Valuations Q3 2020 - 31st Aug 20
3.The Inflation Mega-trend is Going Hyper! - 11th Sep 20
4.Is this the End of Capitalism? - 13th Sep 20
5.What's Driving Gold, Silver and What's Next? - 3rd Sep 20
6.QE4EVER! - 9th Sep 20
7.Gold Price Trend Forecast Analysis - Part1 - 7th Sep 20
8.The Fed May “Cause” The Next Stock Market Crash - 3rd Sep 20
9.Bitcoin Price Crash - You Will be Suprised What Happens Next - 7th Sep 20
10.NVIDIA Stock Price Soars on RTX 3000 Cornering the GPU Market for next 2 years! - 3rd Sep 20
Last 7 days
The Connection Between Stocks and the Economy is not What Most Investors Think - 19th Sep 20
A Virus So Deadly, The Government Has to Test You to See If You Have It - 19th Sep 20
Will Lagarde and Mnuchin Push Gold Higher? - 19th Sep 20
RTX 3080 Mania, Ebay Scalpers Crazy Prices £62,000 Trollers Insane Bids for a £649 GPU! - 19th Sep 20
A Greater Economic Depression For The 21st Century - 19th Sep 20
The United Floor in Stocks - 19th Sep 20
Mobile Gaming Market Trends And The Expected Future Developments - 19th Sep 20
The S&P 500 appears ready to correct, and that is a good thing - 18th Sep 20
It’s Go Time for Gold Price! Next Stop $2,250 - 18th Sep 20
Forget AMD RDNA2 and Buy Nvidia RTX 3080 FE GPU's NOW Before Price - 18th Sep 20
Best Back to School / University Black Face Masks Quick and Easy from Amazon - 18th Sep 20
3 Types of Loans to Buy an Existing Business - 18th Sep 20
How to tell Budgie Gender, Male or Female Sex for Young and Mature Parakeets - 18th Sep 20
Fasten Your Seatbelts Stock Market Make Or Break – Big Trends Ahead - 17th Sep 20
Peak Financialism And Post-Capitalist Economics - 17th Sep 20
Challenges of Working from Home - 17th Sep 20
Sheffield Heading for Coronavirus Lockdown as Covid Deaths Pass 432 - 17th Sep 20
What Does this Valuable Gold Miners Indicator Say Now? - 16th Sep 20
President Trump and Crimes Against Humanity - 16th Sep 20
Slow Economic Recovery from CoronaVirus Unlikely to Impede Strong Demand for Metals - 16th Sep 20
Why the Knives Are Out for Trump’s Fed Critic Judy Shelton - 16th Sep 20
Operation Moonshot: Get Ready for Millions of New COVAIDS Positives in the UK! - 16th Sep 20
Stock Market Approaching Correction Objective - 15th Sep 20
Look at This Big Reminder of Dot.com Stock Market Mania - 15th Sep 20
Three Key Principles for Successful Disruption Investors - 15th Sep 20
Billionaire Hedge Fund Manager Warns of 10% Inflation - 15th Sep 20
Gold Price Reaches $2,000 Amid Dollar Depreciation - 15th Sep 20
GLD, IAU Big Gold ETF Buying MIA - 14th Sep 20
Why Bill Gates Is Betting Millions on Synthetic Biology - 14th Sep 20
Stock Market SPY Expectations For The Rest Of September - 14th Sep 20
Gold Price Gann Angle Update - 14th Sep 20
Stock Market Recovery from the Sharp Correction Goes On - 14th Sep 20
Is this the End of Capitalism? - 13th Sep 20
The Silver Big Prize - 13th Sep 20
U.S. Shares Plunged. Is Gold Next? - 13th Sep 20
Why Are 7,500 Oil Barrels Floating on this London Lake? - 13th Sep 20
Sheffield 432 Covid-19 Deaths, Last City Centre Shop Before Next Lockdown - 13th Sep 20
Biden or Trump Will Keep The Money Spigots Open - 13th Sep 20
Gold And Silver Up, Down, Sideways, Up - 13th Sep 20
Does the Stock Market Really "See" the Future? - 12th Sept 20
Basel III and Gold, Silver and Platinum - 12th Sept 20
Tech Stocks FANG Index Nearing Critical Support – Could Breakout At Any Moment - 12th Sept 20
The Tech Stocks Quantum AI EXPLOSION is Coming! - 12th Sept 20
AMD Zen 3 Ryzen 4000 Questions Answered on Cores, Prices, Benchmarks and Threadripper Launch - 12th Sept 20
The Inflation Mega-trend is Going Hyper! - 11th Sep 20
Gold / Silver Ratio: Slowly I Toined… - 11th Sep 20
Stock Market Correction or Reversal? The Jury Isn't Out! - 11th Sep 20
Crude Oil – The Bearish Outlook Remains - 11th Sep 20
Crude Oil Breaks Lower – Sparking Fears Of Another Sub $30 Price Collapse - 11th Sep 20
Inflation by Fiat - 10th Sep 20
Unemployment Rate Drops. Will It Drag Gold Down? - 10th Sep 20
How Does The Global Economy Recover After This Global Pandemic? - 10th Sep 20
The Best Mobile Casino - 10th Sep 20
QE4EVER! - 9th Sep 20
AMD Ryzen Zen 3 4800x 10 Core 5ghz CPU, Cinebench Benchmark Scores (Est.) - 9th Sep 20
Stock Traders’ Dreams Come True – Big Technical Price Swings Pending on SP500 - 9th Sep 20
Should You Be Concerned About The Stock Market Big Downside Rotation? - 9th Sep 20
Options Traders Keep "Opting" for Even Higher Stock Market Prices - 8th Sep 20
Gold Stocks in Correction Mode - 8th Sep 20
The law of long-term time preference and Gold ownership - 8th Sep 20
Gold Bull Markets: History and Prospects Ahead - 8th Sep 20
Sheffield City Centre Coronavirus Shopping Opera Ahead of Second Covid-19 Peak - 8th Sep 20

Market Oracle FREE Newsletter

How to Get Rich Investing in Stocks by Riding the Electron Wave

A Weakening Global Expansion Amid Growing Risks. Will Gold Benefit?

Commodities / Gold and Silver Stocks 2019 Jan 22, 2019 - 02:37 PM GMT

By: Arkadiusz_Sieron

Commodities

Thousands of political, business and cultural leaders are heading now towards Davos, Switzerland, to attend the World Economic Forum. On the eve of the world’s biggest annual gathering of the rich and powerful, the International Monetary Fund released its newest world economic outlook. What are the forecasts – and their implications for the gold market?

Global Expansion Weakens

Well, the title of the IMF’s update is telling: “A Weakening Global Expansion”. The global economy is projected to grow at 3.5 percent this year, 0.2 percentage point below last October’s projections and estimated performance in 2018. The revisions carry over from softer economic momentum in the second half of 2018, in particular in Germany, due to the problems of the automotive industry, and in Italy, due to the worries about sovereign and financial risks. Moreover, the experts acknowledge now the weakened financial sentiment and project deeper contraction in Turkey than previously anticipated.


What is the most important for the gold market, the US economic growth is expected to decline to 2.5 percent in 2019 (unchanged forecast from October) because of the unwinding of fiscal stimulus and further monetary tightening. The slowdown in America may push some investors into gold’s arms, although, given the sluggish growth in Europe, US dollar-denominated assets still look attractive.

While Risks Grow

The downward revisions may seem to be modest. However, the report does not end here. The problem is that risks to more significant downward corrections are rising. What are these risks? First, a further escalation of trade tensions. Higher trade uncertainty could further dampen investment and disrupt global supply chains. Second, a further deterioration of financial conditions: stock valuations went south, while credit spreads widened. Given a high level of debt, a more serious tightening of financial conditions may be particularly dangerous.

Last but not least, an important risk for the global economy is the possibility that China’s growth slowdown could be faster than expected especially if trade tensions continue. And, of course, Brexit is a big question mark (the US federal government shutdown, if protracted, also poses a downside risk). Gold is a safe haven, so it welcomes rising risks.

Implication for Gold

The recent IMF’s world economic outlook projects slower economic growth amid rising risks. The report is in line with the World Bank’s report released earlier in January, which also said that “the outlook for the global economy in 2019 has darkened.” (see the chart below).

Chart 1: Actual and forecasted global growth for the world (bars), advanced economies (red line) and emerging markets and developing countries (orange line) from 2010 to 2021 (source: World Bank).


What do all those gloomy forecasts imply for gold? Well, a lot. You see, we had a solid expansion in the last two years. Now, the world economy is growing more slowly than expected while downside risks are accumulating. It seems to be an excellent combination for gold, which should shine in a sentiment unfriendly toward risky assets.

To be clear, the slowdown is not the end of the world. There is no global recession around the corner. But, as we argued in the January edition of the Market Overview, 2019 may still be better for gold than 2018. The risk of a sharper decline in global growth has increased, after all. In particular, China’s economy may negatively surprise us, as it transforms itself structurally amid trade tensions and high debt burden. According to the official data, the economic growth was 6.6 percent in 2018 – the slowest pace since 1990. And many economists do not trust the official figures, claiming that China’s economy is actually more anemic (we will write more about China in the February edition of the Market Overview). As it was the case in 2015-2016, concerns about the Red Dragon’s health can trigger abrupt sell-offs in financial markets. Gold should shine, then.

Thank you.

If you enjoyed the above analysis and would you like to know more about the gold ETFs and their impact on gold price, we invite you to read the April Market Overview report. If you're interested in the detailed price analysis and price projections with targets, we invite you to sign up for our Gold & Silver Trading Alerts . If you're not ready to subscribe at this time, we invite you to sign up for our gold newsletter and stay up-to-date with our latest free articles. It's free and you can unsubscribe anytime.

Arkadiusz Sieron

Sunshine Profits‘ Market Overview Editor

Disclaimer

All essays, research and information found above represent analyses and opinions of Przemyslaw Radomski, CFA and Sunshine Profits' associates only. As such, it may prove wrong and be a subject to change without notice. Opinions and analyses were based on data available to authors of respective essays at the time of writing. Although the information provided above is based on careful research and sources that are believed to be accurate, Przemyslaw Radomski, CFA and his associates do not guarantee the accuracy or thoroughness of the data or information reported. The opinions published above are neither an offer nor a recommendation to purchase or sell any securities. Mr. Radomski is not a Registered Securities Advisor. By reading Przemyslaw Radomski's, CFA reports you fully agree that he will not be held responsible or liable for any decisions you make regarding any information provided in these reports. Investing, trading and speculation in any financial markets may involve high risk of loss. Przemyslaw Radomski, CFA, Sunshine Profits' employees and affiliates as well as members of their families may have a short or long position in any securities, including those mentioned in any of the reports or essays, and may make additional purchases and/or sales of those securities without notice.

Arkadiusz Sieron Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules