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IMF View of US Economy May Boost Gold – HSBC

UNITED STATES July 25 2014 4:35 PM
NEW YORK: The International Monetary Fund view of the United States economy may boost gold, should it come true, said HSBC precious-metals analyst Jim Steel.
The IMF on Wednesday suggested the Federal Reserve may have room to keep interest rates at zero for longer than investors anticipate.
Currently, the median forecast of participants in the Federal Open Market Committee deliberations indicates that the fed funds rate is expected to lift off from zero by mid-2015, with a gradual path upward toward a 3.75% long-term level, according to the IMF report.
However, even with this path for policy rates, the economy is expected to reach full employment slowly and inflation pressures are forecast to remain subdued, according to the IMF report.
This could mean that – presuming systemic financial stability risks are contained – there is some scope for policy rates to stay at zero for longer while still keeping inflation under 2%, as per the report.
“Gold is historically sensitive to changes in interest rate expectations and the potential for rates to remain at zero for longer would theoretically be positive for prices, in our view, HSBC added.