10 Economic Trends That Will Shape The U.S. And Gold Market In 2020

What will 2020 be like? Well, as a leap year, it will be for sure longer than 2019, but the rest is a mystery. However, let's point out a few important trends that will shape the U.S. economy and the gold market this year.

  1. Inflation should remain subdued.
  2. The same applies to GDP growth, although global growth could bottom out.
  3. The Fed will be in a wait-and-see mode, but with a dovish bias.
  4. The ECB and the BoJ will remain accommodative.
  5. U.S. dollar should stay strong.
  6. The U.S. fiscal policy will remain easy.
  7. Trade wars will be softer with a phase one trade deal signed.
  8. The uncertainty regarding Brexit should also diminish, as Conservatives won a majority in December parliamentary election.
  9. Thus, investors could increase their appetite for risky assets.
  10. Bond yields have room to move higher in 2020.

We will analyze them for you now, as we believe that investors need a clear guide to navigate through choppy waters of our turbulent economy. Without a broader fundamental perspective, it's easy to drown in the sea of conflicting and exaggerated headlines.

First, inflation should remain subdued, as low inflation is not transitory but more of a permanent phenomenon due to global competition, technological progress, and disruptors such as Amazon or Uber.

Second, the U.S. GDP growth is expected to slow down, falling from 2.4 percent in 2019 to 2.1 percent in 2020, according to the IMF, or even below 2 percent, according to other forecasters. However, with eased trade disputes and global growth possibly bottoming out, the U.S. economic growth could surprise on the upside.

Third, given subdued inflation, the Fed is unlikely to hike the federal funds rate in 2020. The latest dot-plot suggests a pause this year, which would imply a more hawkish stance than in 2019 when we witnessed three interest rate cuts. However, the possible economic slowdown or even more serious economic developments could prompt the U.S. central bank to take some dovish actions.

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If you enjoyed the above analysis and would you like to know more about the most important macroeconomic factors influencing the U.S. dollar value and the price of gold, we invite you to read the ...

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