IMF Downgrades Economic Outlook and Boosts Gold Prices

IMF Downgrades Economic Outlook and Boosts Gold Prices

The International Monetary Fund (IMF) just recently downgraded this year’s economic outlook reinforcing the belief that many have held that the world is heading towards an economic downturn. This means that people will be looking at safe havens to hedge against possible upheavals. The prudent and clever thing to do is to start buying gold.

According to the IMF, the global economy will only grow to 3.3% instead of 3.5% as previous forecasts have suggested. The IMF has already issued two warnings this year. These announcements affected the market, causing the S&P 500 to drop sharply.

The IMF has already cut its forecast twice in this year. This global fund still believes that the economy may still recover in the second half of the year. The economy may still top-out around 3.6% next year. According to economists, there are too many short-term uncertainties and the projections of the coming year seem precarious at best.

There are risks that are contributing to the downside and a number of factors that will affect growth. These risks include, a possible failure of the U.S/ China trade negotiation, failure to effect denuclearization in North Korea, a no- deal Brexit and other factors. Even the gold price Australia might also be affected by the US government tax laws and the wearing off of government spending.

In the U.S the policies of the Fed have come under scrutiny. The central bank has turned back on its three hike forecast and now it is back at zero. The Central bank has to cut rates to combat the economic slowdown, but it hasn’t shown an inclination to do so despite mounting political pressure. Rate cuts may keep equity prices balanced in the short term, but it would have a bullish effect on gold and other dollar- denominated assets.

The gold market is rising high. The spot price for gold reached $7.61 /oz when gold reached the market price of $1,304.71. It meant the bull had taken over and has since increased momentum. Over the first quarter, the market had been at a level that can sustain higher prices. Although the price dropped to $1,200/oz there is a strong base for the price to go up. The ongoing worked over global economic growth and geopolitical tensions provide the gold market with enough ammunition to continue going higher. Low dollar prices, lower equity prices and low Fed’s rates are a perfect recipe that could take the gold price Australia even higher.

This should be gloomy news, a plunging economy is never good news. Those who went through the last recession would not like to go through another one again. There are lessons that were learnt the last tie and the most important lesson of all is that stocks and bonds are pretty aren’t so reliable when the economy is in flux but gold retains its value. Intact, those who had gold to fall back on fared better in the last recession. As things stand now, gold offers higher returns than any other investment. The price of gold looks set to keep rising so savvy investors should invest in this precious metal.

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