(Kitco News) - Gold prices have pushed solidly above last week's 10-month low; however, according to one portfolio manager, the precious metal still faces challenging headwinds as the outlook for the U.S. economy continues to improve.
In a report published last week, Joe Foster, portfolio manager for the VanEck Gold Strategy, noted that gold's price action has been disappointing since November when the market was particularly hard hit by the news regarding vaccines that could bring the COVID-19 pandemic under control.
'This, along with the $1.9 trillion stimulus bill, created an outlook for strong economic growth and euphoria in the markets," Foster said in his report. 'Gold, as a safe haven, will continue to struggle so long as this outlook prevails, possibly through the first half."
Because of the growing optimism surrounding the U.S. economy, Foster said that he is downgrading his short-term outlook for gold.
'We have downgraded our near-term outlook from a consolidation to a correction in which we expect gold to trade above $1,600," he said.
Currently, April gold futures last traded at $1,728.80 an ounce, up 0.52% on the day.
Although gold could continue to struggle in the next few months, Foster said that they expect to see a catalyst emerge in the second half of the year to drive gold prices higher. He added that he remains a long-term gold bull.
'The most likely catalyst would be excessive inflationary expectations. Inflation expectations have returned to pre-pandemic norms, although a number of developments suggest it could spiral out of control," he said.