Mixed Metals As IMF Forecasts Lowest Growth Pace Since Crisis

Mauricio Carrillo
Gold up ahead political and economic events
Gold up ahead political and economic events

Gold prices traded lower on Wednesday while silver is posting gains after the International Monetary Fund cut global growth forecast. Trade tensions on the United States and the European Union are one of the reasons.

Traders are waiting for developments in the economic and policial scene with Brexit, the EU-US trade-war, the European Central Bank monetary policy decision, and inflation data and Fed minutes in the United States.

IMF sees global growth path in years

The International Monetary Fund sees now a dark outlook across major rich-world economies with higher trade tariffs weighing on global commerce.

The IMF decided to cut its global growth expectations to the lowest since the financial crisis. According to the IMF, the world economy will grow 3.3% in 2019, down from 3.5% expected in January.

It is the third time the IMF downgraded its outlook in six months, now to the weakest growth rate since 2009. “This is a delicate moment” for the global economy, Gina Gopinath, IMF’s chief economist said.

Regarding the United States, the IMF also cut its forecast for economic growth to 2.3% in 2019, down from 2.5% expected in January. On the bright side, the IMF raised its 2020 growth forecast to 1.9%, from 1.8% projected in January.

The fund raised its forecast for China to 6.3% in 2019, up from 6.2% expected in January. The UK will grow 1.2% this year, down from 1.5% expected three months ago. The Euro area will rise by 1.3% in 2019, down from 1.6% expected three months ago.

Dollar index down for the third day

Dollar index is trading negative for the third day as the unit is extending its 97.50 rejection. It is digesting a possible dovish forecast from the Fed that will erase any expectation for a rate hike.

DXY is currently trading at 96.90, 0.15% negative on the day. T&he pair is now heading to test yesterday lows and 20-day moving average area at 96.85.

As technical indicators are suggesting more downside, the next support would be 96.65, where the 50-day moving average is. Below there, check the 200-day moving average as a crucial level if bulls want to keep the control.

So, more losses would fuel metals like gold to visit fresh highs.

Gold flat ahead of economic and political developments

XAUUSD daily chart Gold April 10

Gold is fighting to post daily gains on Wednesday following a two days recovery from the sub-1,300 area.

XAU/USD remains near to 2-week highs around 1,306; however, the metal is waiting for new catalysts in the form of economic data and political developments.

Currently, XAU/USD is trading at 1,304, flat on the day. The pair is heading to the north and Tuesday’s highs at 1,306, and the 50-day moving average level at 1,308 are acting as resistance.

In this framework, FX Empire analyst James Hyerczyk considers that odds are to the upside as a “dovish surprise in Fed Minutes could spike prices higher” in gold.

In the same way, Alfonso Esparza, senior market analyst at Oanda said that gold “will continue to be bid as the Brexit drama and trade stories unfold at the same time that major central banks continue their dovish rhetoric.”

So, above 1,308, Gold prices will find resistances at 1,325, March 25 high, and then the selling zone at 1,330. Above there, the frontier is located at 1,346.

Silver consolidates above 15.20

XAGUSD daily chart Silver April 10

Silver is trading positive on Wednesday as investors are selling the Dollar amid global economic growth worries.

On the day, XAG/USD is trading 0.35% positive at 15.27. The Unit is in consolidation mode above 15.20 with indicators suggesting the possibility of a bullish break in the next days.

Watch out for a break above April 9 highs at 15.35 and the 50-day moving average at 15.50 as the next resistance.

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