The price movements of some major commodities such as gold, silver and crude oil seem to have gained upward momentum due to uncertainty created by international macroeconomic headwinds. In the meantime, the world’s strongest currency, the US Dollar, is on a gradual decline.
First, it seems that neither the United States nor China is willing to back down from the ongoing trade war anytime soon. “To be honest, if US-China trade tensions are drawn out, there will be a serious risk to the global economy – first to the two countries’ own economies,” said Haruhiko Kuroda, governor of Bank of Japan (BOJ), during a news conference following the Japanese central bank’s policy meeting in early January.
The viewpoints of Europeans are also looking pessimistic at the moment. “The risks surrounding the Euro area growth outlook have moved to the downside on account of the persistence of uncertainties related to geopolitical factors and the threat of protectionism, vulnerabilities in emerging markets and financial market volatility,” warned Mario Draghi, president of European Central Bank (ECB), during a press conference held on January 24 following the bank’s policy meeting.
Many expect that the Federal Reserve could join the choir following its policy meeting scheduled for January 30. The tones of the Federal Reserve committee members have been consistently dovish after the bank raised interest rates in December, the fourth rate hike in 2018.
Some analysts have noted that a growing dovish tilt among central bankers is positive for gold; it is just one of the factors to drive gold prices in the near-term. Thus, the outlook shows shining days ahead for gold as many investors across the globe will find investing in the yellow metal as a safe haven.
The no-progress situation in the trade war between US and China has fueled the fears about the global economic slowdown which is likely send the price of oil lower for the next couple of months. Also, another pivot in monetary policy by the Federal Reserve back to a hawkish tone poses an additional downside risk to the price of crude oil in the international market.
As the elections in India scheduled for this year for the Lok Sabha, the lower house of Indian parliament, will decide the fate of current government led by Prime Minister Narendra Damodar Das Modi, the value of Indian Rupee is supposed to stay at current level till the results of the polls. Still, if the USD index is weakened due to the global economic outlook or US-China trade deal, Indian Rupee is expected to become stronger on the back of the robust economic growth in India for the mid-term. This is likely affect the value of Nepali Rupee too with its own consequences. If the outlook is the increased value of Nepali currency, the saving in the economy will be ultimately positive along with advantage to the general people due to the tamed inflation rate.