Gold takes investors on roller-coaster ride in 2018

On the final trading day of 2018, gold is trading quietly. In the Monday session, the pair is at 1279.49, down 0.08% on the day. With no U.S. events on the schedule, traders can expect an uneventful day.

Gold prices showed plenty of volatility in 2018 and declined 3 percent over the year. The base metal started the year strongly, with gains of 3.3% in January, only to give up most of these gains in February. Gold posted consecutive monthly losses from April until September, gold declining 10.4 percent during that time. However, gold has recovered in the fourth quarter with strong gains. Gold prices are up 4.7 percent in December, as the safe-haven asset has taken full advantage of tumultuous equity markets.

The chart below shows the commodity’s movement over the past year:

Open: 1302.18 High: 1365.16 Low: 1160.06 Close: 1279.49

I am bullish on XAU/USD

As we welcome 2019, here are some items the markets will be closely following:

Global trade war

Gold has been a beneficiary of the ongoing global trade war, which has shaken global equity markets and dampened the global economy. China and the U.S. have slapped tariffs on each other’s products, and the U.S. has threatened to raise the tariffs on Chinese goods from 10 percent to 25 percent on March 1. However, President Trump has agreed to suspend the tariffs while talks are ongoing, and U.S. and Chinese teams are slated to meet this week. If the sides can reach an agreement, risk appetite will rise and gold prices could reverse directions and head lower.

Federal Reserve rate policy

After four rate hikes in 2018, the Fed will be drastically easing up on raising rates in 2019. Just a few months ago, there was heady talk of three or four rate hikes in 2019, but the Fed made an abrupt U-turn, saying the “neutral rate range” had been reached. Analysts expect one rate hike in 2019, as this year’s hikes and the global trade war have lessened the pace of expansion in the U.S. economy.

U.S Government shutdown

A partial shutdown of the U.S. government has entered its second week, with no resolution in sight. President Trump has insisted that a spending bill include some $5 billion for a wall on the Mexican border, but Democrats in the Senate have blocked the bill. The impasse will continue into 2019 and will cost the taxpayer billions of dollars. Previous shutdowns have been resolved within a few weeks, as politicians are wary to drag out the fight and risk the wrath of voters for the lack of government services. The U.S. dollar will be under pressure while the shutdown continues, which is bullish for gold.

This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Kenny Fisher

Kenny Fisher

Currency Analyst at Market Pulse
Kenny Fisher joined OANDA in 2012 as a Currency Analyst. Kenny writes a daily column about current economic and political developments affecting the major currency pairs, with a focus on fundamental analysis. Kenny began his career in forex at Bendix Foreign Exchange in Toronto, where he worked as a Corporate Account Manager for over seven years.