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Analysts watch global economy for gold price hints

Monday, January 4, 2016

The gold price fell by 10.5 per cent in 2015, marking the precious metal’s third year of annual losses.

Gold stood at around £737 per troy ounce at the end of December 2014 and ended 2015 at £719.82. This morning (4 January), the gold price stood at £726.64 as traders returned to the market after the Christmas break.

With low prices prevailing, the last 12 months have been good for buyers seeking a long term investment, but analysts are now looking for hints of how the precious metal will behave in 2016.

The stronger economy in the US combined with a slowdown in China – the world’s biggest gold buyer – and the robust performance of the US dollar all played major roles in the falling price of gold in 2015.

The US dollar ended the year nine per cent stronger than in 2014 and has been enjoying a long period of good performance against other currencies. A strong dollar generally signifies a weaker value for gold, and vice-versa. Many analysts now expect the dollar to continue its ascendancy in 2016, and coupled with interest rate rises in the US, this could spell further falls in the gold price.

Karim Merchant, group CEO and managing director of Pure Gold Jewellers told the Gulf News:  “For 2016 at least, it looks like gold will be around current levels or below. However, we must consider that the world markets are really dynamic.”

Rolf Schneebeli, CEO of Gold Services AG, also pointed out that world events and concerns about rising inflation will play a role, and could lead to a higher gold price.

He said: “In the US, we already see the economy starting to perform nicely, including an increase in inflation. When the European economies do the same [perhaps] in one to two years, then we could see the inflation fear coming back to the market and the trend of the gold price might change.”