Brace yourself for an upsurge if the US President, Donald Trump makes his ways to the US Federal Reserve for trimming down interest rates. Gold is already on a pace up; such interaction will lead to even higher gold prices in the market. Analysts at Capital Way have labelled such an increase a ‘stubborn rise,’ despite the fact that the US Fed has been very cautious and in an alert mode for its monetary policy.
The only glaring issue with this setup would be Trump’s agenda for rate cuts. If this happens, all central banks such as The European Central Bank are expected to do the same to their currency.
Trump vs. US Central Bank
Donald Trump, through his numerous tweets recently has called out the US Fed as a system with a ‘faulty thought process.’ There is no doubt about the disagreement between Trump and the central bank as he aims to lower the US interest rates.
According to investing.com, Chairman of the US Federal Reserve, Jerome Powell has brushed off Trump’s accusation. Since the US Central Bank is an independent body, the war is likely to heighten as the bank doesn’t adhere to short-term political pressure of any kind. They derive pleasure in exercising their independence without any external interference, not even from the president.
Going with the Fed Rate Monitor widget of Investing.com, investors are convinced that there will be a quarter-point cut, as well as a 60% chance that the rates will be 50 basis points lower after the September policy meeting.
It isn’t just about the US Fed; globally, central banks have taken a dovish stance that will only stir up a forex war.
Factors That Affect The Gold Price
The value of gold is affected by two core factors, the laws of demand and supply, and the strength of the dollar. There don’t necessarily have to a disruption in the supply and demand chain for the gold price to change.
According to Alex Madison in Capital Way: “We will neutralise the effect of demand and supply for a moment and will only examine for the impact of the dollar. The price of the gold is monitored in US dollars, and if the dollar strengthens, we will need fewer dollars to buy gold, therefore, meaning that the gold value will fall. In the same way, if the dollar weakens, the value of gold corresponds with a rise in value.”
Gold Is A Less Risky Asset Than Any Other Assets
Gold prices have soared high in the past six years, and investors are wondering whether to invest in gold or not. In terms of the financial crisis, investing gold is commonly the wisest and logical decision, especially when there is no attractive currency, or perhaps, a safe asset. According to Analysts in Capital Way’s trading room, the chances of a plummet are increasing, especially after following a decade of soaring in stock markets around the world. In such an uncertain time, wise investors are expected to invest in less risky assets or suffer the consequences. So the more the dollar weakens, the more the gold jumps and has the potential to break price records.
Professionals at Capital Way have speculated the rise of the price of gold, and believe it’s a trend likely to continue medium to long term. Checking the ground before leaping will ensure you don’t reach a point of regret or a financial crisis. Being alert and timely when it comes to your entry is critical to maintaining a favourable risk-reward ratio and a more positive profit expectancy over time.
* This Capital Way review does not constitute a recommendation for investment and does not replace financial advice.
Original Source PRFire.com