If the Fed actually slows down the pace of its 2019 interest rate hikes, that should weaken the dollar noticeably. Of that, gold is likely to benefit significantly. But one important ingredient may still be needed to keep the price of gold from rising: inflation.Because when inflation rises, so does the real interest rate. Which in turn is, according to many experts, negatively correlated with the price of gold. Because gold is traditionally considered as inflation protection – at least if the price of gold rises at the same pace as the current price level, as the experts of Flossbach von Storch write.At any rate, the price of gold might need a boost. In the nearly 2018 year, the gold price has fallen in dollar terms since the beginning of the year over three percent. In the past three months, however, the listing has increased more than six percent. Some experts believe that the positive mood could continue. A more successful year 2019 is at least not excluded.
The Fed factor
One factor is the political uncertainty that has been worrying the markets for some time now. For example, should the US tariff dispute with China and the EU continue to escalate and markets become even more volatile, gold could play a role as a “safe haven”. The US-China trade war is a source of concern to the market and therefore potentially a source of support for the gold price, Macquarie analysts write. But at the moment investors are more interested in the US economy and the interest rate policy of the Fed.
According to the Commerzbank experts, the gold price will be largely determined by the Fed next year. For if the end of the rate hike cycle is actually approaching, that should weigh on the dollar. As gold is traded in dollars, that could in turn have a positive impact on global demand.