The spot price of gold has held above the $1,250 mark as investors await a key rate decision. Today the U.S. Federal Reserve is expected to raise the benchmark rate by 0.25% to 2.5%. President Trump has been critical of the Fed’s moves but there are no indications that the central bank will be allowing his rhetoric to influence its decision making.
In a recent interview Federal Reserve chairman Jerome Powell hinted that the Fed was nearing its "neutral" rate, which means that it may hit the brakes on hikes in 2019. Economic fundamentals are projected to weaken in 2019 as the sugar rush from U.S. tax reform wears off. A pause on rate hikes should also prop up gold against the dollar.
Gold equities have responded well to the stock market turmoil this fall. Barrick Gold (TSX:ABX)(NYSE:ABX), the largest gold producer in the world, has seen its stock shoot up 37% over the past three months. This has pushed the stock into positive territory for 2018. Yamana Gold (TSX:YRI)(NYSE:AUY) stock has climbed 11% month over month. Shares are still down 18% in 2018 so far.
Top gold producers will become cash machine if the spot price of gold carries momentum and holds above the $1,350 mark in 2019. Economic growth is forecast to slow across the developed world next year, which will put intense pressure on central bankers who have sought to normalize interest rates and monetary policy over the past several years.
The next year is shaping up to be a perfect storm for the yellow metal.
