Neils Christensen - an analyst at Kitco News commented that gold is recording a strong profit-taking as soon as the North American stock market opens. Although the International Monetary Fund (IMF) has just sharply lowered its forecast for US GDP growth this year, the demand for gold as a safe-haven asset has not appeared.
According to the latest economic forecasts, IMF experts predict that US GDP will grow by 1.8% this year, down 0.9% compared to the previous forecast in January, according to the World Economic Prospects Report released on Tuesday.
At the same time, the IMF forecasts that the European economy will grow by 0.8%, down 0.2% compared to the previous estimate. Total global GDP is expected to increase by 2.8%, down 0.5% compared to January.
Increased trade warfare and uncertainty in trade policy could reduce short-term and long-term growth. At the same time, the declining policy measures will weaken the resilience to future shocks," experts said in the report.
The next direction needs clarity and cooperation. Countries should work together to create a stable and predictable trade environment, support debt restructuring and address common challenges.
At the same time, they need to address domestic policy issues and structural imbalances to ensure internal economic stability. This will help balance growth and inflation, rebuild reserves and regenerate medium-term growth prospects, while minimizing global imbalances, the experts added.
Along with weak growth forecasts, the IMF also adjusted the US inflation forecast to 3%, up 1 percentage point compared to the initial forecast in January.
The market witnessed a strong profit-taking through the European trading session and at the time of opening North America. Although gold is considered an important safe haven asset, some experts believe that the economic downturn could cause initial difficulties for the precious metal, as investors are forced to sell off profitable transactions to compensate for losses from the stock market.
According to Jim Wyckoff - senior analyst at Kitco, gold has encountered a wave of profit-taking due to the strong recovery of US stock indexes.
"The recent greater price fluctuations in gold are an early sign that this strong growth cycle may be close to a possible upcoming short-term market peak and peak, from a time perspective rather than from a price perspective.
Technically, June gold investors are having a solid short-term technical advantage, but today's price action shows that they may be exhausted. Gold investors' next target is to close above solid resistance at today's contract high of $3,509.9/ounce.
The long-term downside target of discount investors is to push futures below $3,200/ounce. The first resistance level was $3,550/ounce. The first support level is $3,375/ounce," the expert said.
