Gold Prices May Rise If Davos Forum, IMF Outlook Spur Easing Bets

XAUUSD 2-hr Price Chart

GOLD PRICE OUTLOOK: BULLISH

  • Gold prices may rise if Davos forum spooks investors, spurs easing bets
  • Demand for havens may be amplified by IMF World Economic Outlook
  • US-EU trade tensions, corporate earnings may also magnify gold gains

DAVOS CONFERENCE IN FOCUS

The annual conference in Davos, Switzerland from January 22 to 24 will be a closely-scrutinized event as world leaders and business titans convene to discuss the most pressing issues heading into 2020. Last year, the event elicited a significant amount of cross-asset volatility as officials gave their outlook for the global economy. However, this year, the impact may be felt wider and deeper across financial markets.

Since then, geopolitical tensions around the world have risen and further eroded the fundamental outlook which is already burdened with unusually-high uncertainty. Investors may therefore be particularly sensitive to comments from officials that have implications for monetary policy. A gloomy tone may inflame easing expectations from central banks and push the demand for anti-fiat hedges – like gold – higher.

IMF WORLD ECONOMIC OUTLOOK MAY INFLAME DEMAND FOR PRECIOUS METALS

During the conference, the IMF will also be releasing its World Economic Outlook which may amplify the effect outlined above. Global growth updates from several institutions have been consistently revised downward amid strained US-China trade relations. It is likely that the IMF will cite similar ailments afflicting the global economy - only now the world is comparatively more vulnerable than it was a year ago.

Demand for Negative Yielding Debt Chart

EU-US TRADE TENSIONS RISING

EU-US trade tensions may soon begin to escalate following a warning from the EU’s new trade chief Phil Hogan that the EU intends on retaliating with tariffs over WTO dispute with Boeing. Relations between Washington and Brussels has been put on the back burner, though it may become the new trade war of 2020. A revived cross-Atlantic trade tiff would further undermine global growth and may push gold prices higher.

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