XAU/USD: Risks for Economic Growth in the USA
Yesterday’s speech by the head of the US fed Janet Yellen obviously disappointed market participants, as it indicated that chances of the interest rate increase in the USA in April are low. Although the US Fed think that US economy is steady and will be able to resist even the worst situations of the global economy, economic and financial uncertainty in the world is too high. Mrs. Yellen believes that slowdown of the Chinese economic growth, decline in oil prices, downgrade forecasts of the global economic growth and other negative developments in the world create risks for economic growth in the USA. Slowdown of economic growth in the Asian Pacific region has been also indicated in the annual economic forecast of the Asian Development Bank.
At the meeting on 15-16 March, the US fed left interest rate unchanged and lowered forecast of tightening monetary policy from this year until the end of 2018.
It was expected earlier that the key interest rate would be increased up to 1.375% by the end of 2016, up to 2.375% by the end of 2017 and to 3.25% by the end of 2018. Now, it is planned that the key interest rate will be raised twice: to 0.875% in 2016, by the end of 2017 it will be 1.875% and by the end of 2018 года - 3%.
Precious metals immediately rose after the Mrs.’ Yellen speech. At the closing session COMEX the price of June futures of gold has grown by 1.3% on Tuesday up to 1237.50 USD per ounce. Low interest rates are favourable for gold. Gold does not bring profit in interest and dividends but as a rule the demand for gold is high in situation of the political or economic instability.
Now, market participants will wait for the US news on Friday, when at 14:30 (GMT+2) NFPR for March will become known. Poor data on this index will increase belief of the market participants that interest rates in the USA will not be raised in the first 6 month of this year. In this case the price of gold will rise. Strong data on this index will make possible the rise in the interest rates in April or June and thus, cause the rise in the USD and decline in the price of gold.
