Gold Could Reach New Heights Despite Hawkish Fed
Gold reached $1,295 an ounce earlier this month before an optimistic message by the Fed sent the dollar rallying. Despite Janet Yellen’s hawkish statements, which promise an additional rate hike this year, some traders believe that the metal still has plenty of potential to pass the key level of $1,300.
TJM Institutional Services’ Jim Iuorio isn’t discouraged by the Fed’s hawkish tone and expects gold to do well in the near future. Speaking to CNBC, Iuorio focused on the ongoing trend of weak economic data, including a series of disappointing job reports.These factors should put of pressure on the dollar and move it lower, asserts Iuorio, which he believes in turn would boost gold.
Before the Fed’s recent announcement, the greenback reached its lowest level since last November’s election, as Washington has become embroiled in drama and the Trump administration’s ability to deliver on promises has been placed into question.
While the metal has been momentarily set back, Iuorio said that the long-term case for gold remains solid and thatpeople should focus on its strong fundamentals instead of the occasional slump. “I’m a longer-term bull in gold and if you look at the long-term chart the trend is still higher,” said the trader.
One of those strong fundamentals is the recent overhaul of India’s gold tax, which could have a significant impact on gold prices. Until recently, India had over a dozen levies controlling the importing and distribution of gold, giving rise to smuggling and tax evasion on a large scale.
The government chose to replace these levies with a single tax called the Goods & Services Tax, meant to improve transparency in the country’s gold trade. Many feared that the tax would be placed at 5%, as was the initial prediction, which would have increased the taxation on gold jewelry from its current state.
However, the government recently announced that the Goods & Services Tax, which rolls out on July 1, will be a fixed 3%. Path Trading Partners’ Bob Iaccino believes that this will have a positive impact on gold trade in the country that continues to assert its spot as the world’s top gold consumer. The trader said that the tax could drive jewelers and retail investors to buy gold, causing prices to rise as a result.
Aside from making gold supply more transparent, the tax also stands to boost India’s economic growth, giving another upside to the yellow metal.