Gold may be poised to rally as speculation mounts that the Federal Reserve will hit the pause button on interest rate hikes in 2019
Monarch Networth Capital
Commodities have witnessed a relief rally since the US and China agreed to a 90-day ceasefire in their longstanding trade dispute during the recently-concluded G20 summit, easing fears of a full-blown trade war between the two.
Tensions between the two economic superpowers have dominated headlines for most of the year, with both sides imposing tit-for-tat tariffs on each other's products. The standoff had raised fears among investors that the global economy could be dragged by the dispute.
The US agreed to maintain tariffs on more than $200 billion worth of Chinese products at 10 percent. If after 90 days, the two countries are unable to reach an agreement, the rate will be raised to 25 percent.
The rupee posted its biggest single-day rise in 16-weeks on December 3 on likely overseas fund flows into local stocks amid rising crude oil prices beyond $60 a barrel mark.
Crude oil prices have jumped, as a trade ceasefire between the US and China sparked demand for riskier assets. Oil is also receiving support firstly amid growing expectations that major producers, led by Saudi Arabia and Russia, will agree on some form of production cut at a key OPEC meeting in Vienna later this week.
Secondly, the announcement by the Canadian province of Alberta that it would force producers to cut output by 8.7 percent, or 3,25,000 barrels per day (bpd), to deal with a pipeline bottleneck that has led to crude building up in storage, also supports the price.
Gold may be poised for a rally as speculation mounts that the Federal Reserve will hit the pause button on interest rate hikes in 2019.
After lift-off in late 2015 followed by a rise a year later, the US central bank has since steadily raised benchmark rates and is widely expected to do so again this month.
But there is no clarity as Fed Chairman Jerome Powell said last week that rates were “just below” estimates of the so-called neutral level, which markets inferred as a softer stance than previous comments.
The author is Head - Commodity and Currency Research at Monarch Networth Capital.Disclaimer: The views and investment tips expressed by investment expert on moneycontrol.com are his own and not that of the website or its management. Moneycontrol.com advises users to check with certified experts before taking any investment decisions.