11:10, 16 October

Climbs to Four Month High as IMF Cuts Growth Forecasts

Gold has enjoyed a solid surge higher in the last week or so moving to its highest levels in nearly four months, after being content to trade right around the key $1200 level for an extended period. It has received both support and resistance from this level in the last couple of months and didn’t appear to be in any rush to move too far away. The $1240 level was significant several months ago when gold received some short-term support there and subsequent resistance, so it may struggle again at this level should it rally a little higher.


Given the amount of time that gold consolidated around the $1200 level, it wouldn’t surprise anyone if it continued to do that should gold ease lower from its recent surge higher. Throughout the second half of June gold dropped sharply to fall to a then low for 2018 below $1240 before being propped up at this level. The key level of $1240 had been a steady rock of support in the last 12 months for gold so it is likely to offer some reasonable selling should it continue to rally higher.

After falling for several years up until the end of 2015, which saw it fall from its all-time highs down to around $1050, gold has done well in the last few years to regain some of those losses, although it is really returning the gains in the last few months. It had climbed back above $1300 on several occasions since then and generally in the last 15 months it had been steadily climbing higher from around $1100.

Gold prices have been given a small boost as the International Monetary Fund (IMF) has cut its global growth forecasts. The IMF has suggested that trade tensions between the U.S. and its trading partners have started to hit economic activity worldwide. The IMF said the global economy is now expected to grow at 3.7% this year and next year, which is 0.2% points from an earlier forecast. Maurice Obstfeld, the IMF chief economist, said in a prepared speech that earlier projections now appear to be "over-optimistic" given that risks from "further disruptions in trade policies" have become more prominent."Two major regional trade arrangements are in flux — NAFTA (where a new trilateral agreement awaits legislative approval) and the European Union (with the latter negotiating the terms of Brexit). U.S. tariffs on China, and more broadly on auto and auto part imports, may disrupt established supply chains, especially if met by retaliation," he said."The impacts of trade policy and uncertainty are becoming evident at the macroeconomic level, while anecdotal evidence accumulates on the resulting harm to companies. Trade policy reflects politics, and politics remain unsettled in several countries, posing further risks," he added.