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Analysts Expect A Weakening Dollar In Coming Months

The US dollar is looking weak in wake of poor news. Many analysts expect this weak dollar to continue which could cause a spike in the price of gold.

With the dollar sinking on Tuesday due to March US retail sales data, gold has continued its pattern of moving with the greenback. The dollar fell nearly 1%, while gold fell approximately half-a-percent.

The US economic outlook is not looking good, according to the IMF, which lowered its US forecasts for US growth to 3.1 percent for this year and next from January’s expectations of 3.6 percent and 3.3 percent.

The US dollar increased 3 percent last week, fuelled by interest rate expectations by the US Federal Reserve versus looser policies elsewhere in the world.

IMF and economic data is pointing towards a weaker dollar in coming weeks, while the euro is climbing.

“Couple that with the IMF stuff, and I think you have reason to trim (dollar) positions,” he said, “and that, of course, triggered the short-term stops above yesterday’s highs.”

As The Business Standard writes,

The dollar, however, remained under pressure on views that U.S. economic growth slowed sharply in the first quarter.

Investors turned their attention to Friday’s U.S. nonfarm payrolls, which economists polled by Reuters forecast to show an increase of 245,000 in March after a 295,000 rise in February.

“There is a lot of book-squaring ahead of the long Easter weekend. We can definitely see liquidity already thinning this afternoon and there is a lot of uncertainty about tomorrow’s nonfarm payrolls number,” said Afshin Nabavi, MKS SA head of trading.

Trading is expected to thin on Friday, when most U.S. markets will be closed for the Easter holiday, while some European markets will close from Friday through to Monday, reopening on Tuesday.

“Good news for the economy is bad news for gold, still meaning no inflation in sight and rate increase schedule (is) again confusing due to today’s jobless claims,” said George Gero, preciousmetals strategist for RBC Capital markets in New York.

“The precious metal could face higher volatility as we approach toward Friday’s U.S. nonfarm payroll number,” said Naeem Aslam, AvaTrade chief market analyst. “(But) we may actually see a weak number, which could push the dollar lower.”

A weaker nonfarm jobs report could push back expectations for a U.S. interest rate hike, which some analysts predict could come as early as June.

Any hike by the Fed, which has kept rates near zero since 2008 to stimulate the U.S. economy, could reduce demand for perceived safer assets such as gold.


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