Gold prices have hit a critical crossroads, with macroeconomic forces poised to pull the yellow metal in either direction, this according to Peter Hug, Global Trading Director of Kitco Metals.
“I think in the short term, gold is a difficult metal to call at these levels now. I don’t think the Fed is going to drop rates in the short term but I do think that there could be other risks to the Fed policy and that would obviously be if the U.S. stock market started to sell off,” Hug told Kitco News.
Hug’s comments come as Federal Reserve Chair Jerome Powell testified before Congress on Tuesday and said that his outlook on the economy remains positive, while the Fed continues to monitor potential downside risks from the coronavirus.
“Powell made it fairly clear that at least in the immediate term he’s happy with the way the economy is moving. He’s happy with the employment gains, he’s happy with household formation and he thinks the economy is in a relatively strong place,” Hug said.
On stocks, Hug noted that valuations are overextended, and that a major correction could come next quarter.
“Do I think the market is extended and could use a correction? Yes, absolutely,” he said. “The equity markets have some legs, probably through spring and then I would be a bit more concerned about the strength of the rally, especially coming into an election year."
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