The gold prices hold the ground after the IMF downgrades global growth
(Kitco News) – Gold prices stick to the latest, but see little reaction after the International Monetary Fund downgraded its economic forecast for the world economy.
In its latest growth forecast, the IMF said it sees the world economy growing 3.3% in 2019, down from the previous estimate of 3.5%. For the world's largest economy, the IMF said it sees the US growing 2.3% this year, down from the previous forecast of 2.5%.
Analysts expect most downgrade, so there has been a subdued response in the financial markets. Gold prices adhere to modest gains, trading close to a week high in the first response to the financial data. June gold futures last traded at $ 1,308.80 a ounce, up 0.53% on the day.
The IMF said that although growth prospects expect to pick up in the second half of the year, the risk is tilted to the disadvantage due to increasing geopolitical uncertainty and ongoing trade disputes.
"While the overall view remains good, there are many disadvantages to the risk. It is a troubled truce in trade policy, as tensions can flare up and play out in other areas (such as the automotive industry) with major disruptions in global supply chains, The IMF also said in the report.
The IMF also said high levels of public and private sector debt could worsen downside risks.
The outlook may be positive for gold prices. The IMF warns that further economic weakness may weigh on market sentiment.
" The potential remains for a sharp deterioration of the market sentiment, which would mean portfolio benefits away from risk remuneration, major spreads on securities port securities and generally tighter financial conditions, the IMF said.
Adam Button, CEO of Forexlive.com, said the latest IMF forecasts do not paint a nice picture for investors.
"It was largely expected, but it is a reminder that the entire reversal in the market sentiment was based on a turn in the central banks, not a swing in the real economy," he says.
Look at other domestic forecasts, the IMF said it sees that the euro area economy is growing 1[ads1].3 percent this year, down from the previous estimate of 1.6%, Canada's economy is expected to increase by 1.5%, down from the previous forecast of 1.9%.
One the bright spot in the IMF's report is in China; the fund increased its 2019 forecast to 6.3%, up from its previous 6.2% projection.
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