From Frank Holmes at Frank Talk:
With a majority of investors now betting that the current rate hike cycle has peaked, the U.S. dollar looks to be in retreat, having lost about 1.7% over the past month. Mike McGlone, commodity strategist at Bloomberg Intelligence, writes that he believes the "2019 dollar downtrend has legs." This is constructive for metals and commodities in general, gold specifically. On Friday, in fact, the yellow metal achieved a "golden cross," whereby the 50-day moving average crosses above the 200-day moving average – a very bullish sign.
Among those that are most bullish on the precious metal is Goldman Sachs. In a report last week, the investment bank maintained its overweight recommendation and raised its 12-month price forecast up from $1,350 an ounce to $1,425, a level last seen in August 2013. Goldman analysts contend that the gold price "will be supported primarily by growing demand for defensive assets, with a slower pace of Fed rate hikes in 2019 boosting demand only marginally."
The World Gold Council (WGC) made a similar case in its 2019 outlook last week, predicting that global investors will "continue to favor gold as an effective diversifier and hedge against systemic risk." The rise in protectionist policies around the world is chief among the risks since they tend to lead to higher inflation and slower economic growth over the long term, according to the WGC.
I believe the current government shutdown, over funding for a wall along the southern border, is evidence of the risks protectionist policies pose. Now the longest in U.S. history, and with no end in sight, the shutdown could start to take a toll on the economy the longer it lasts, according to Federal Reserve Chair Jerome Powell, and perhaps even cost the U.S. its triple-A credit rating.