Larry Kudlow Recommends Selling Gold And Buying 'King Dollar;' Analysts Not So Much
(Kitco News)- Goldprices appear to be struggling Thursday , in part because the metal is seeing little love from the WhiteHouse’s new national economic advisor Larry Kudlow.
Inan interview with CNBC Wednesday, Kudlow said that he supports a strong U.S.dollar policy adding, “I would buy King Dollar and I would sell gold.”
Lookingat the U.S. dollar, Kudlow said that a great country needs a strong currency.
“I'm notsaying the dollar has to go up 30%, I'm just saying let the rest of theworld know that we are going to keep the world's international reserve currencysteady," Kudlow said in the interview. "That creates confidence athome."
Goldprices remain weak as the market digests the comments. April gold futures lasttraded at $1,318.90 an ounce, down 0.51% on the day.
However,analysts are not completley convincedgold investors should take Kudlow’scomments to heart.
ColinHamilton, Managing Director of Commodities Research at BMO Capital Markets saidin a report that Kudlow’s comments on gold and the U.S. dollar don’t come asmuch as a surprise and he added that the bullish rhetoric will only have ashort-term impact on U.S. dollar strength.
“BMO’sFX Strategy team thinks that he will increase rhetoric for a stronger USD overthe coming months, which FX markets may initially react to, but that anyhoneymoon phase would last only 12 months,” he said.
Hamiltonadded that ultimately, growing government deficits will have a long-termbearish implication on the greenback, which would be supportive for gold.
ColinCieszynski, chief market strategist at SIA Wealth Management, said that he is paying little attention to what Kudlow has to say about gold and the U.S.dollar. He added that comments from new Federal Reserve Chair Jerome Powellwill have more impact on the two markets.
“U.S.government officials have a habit of talking up the U.S. dollar while lettingit weaken, to help them on trade,” he said. “If the U.S. dollar goes up it willbe because of fundamental factors rather than anything that the administrationhas to say.”
Inthe near-term Cieszynski, said that gold could continue to fall, and eventuallytest support at $1,300 an ounce ahead of next week’s Federal Reserve monetarypolicy decision. He added that Powell is unlikely to strike a dovish tone.
“TheFederal Reserve is going to raise its forecasts next week and that is going tosupport the U.S. dollar,” he said.
RyanMcKay, commodity strategist at TD Securities, said that his firm is also payingmore attention to the Federal Reserve rather than the Trump Administration. Headded that TDS expects that gold prices could continue to fall next week buteventually pushes higher in the second half of the year.
“Wethink it is unlikely the Federal Reserve will be able to hike ratesaggressively this year and that will support gold prices,” he said.
By Neils ChristensenFor Kitco News
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