Monday, January 9, 2017
Gold has started the year with gains, hitting monthly highs last week and adding almost two per cent to its value.
However, market analysts are warning investors that the surge is likely to be halted because the US Federal Reserve is on course to raise interest rates. When the cost of borrowing rises – pointing to improvements in the economy – the value of gold usually falls.
Mark To, from Kong Kong-based Wing Fung Financial Group, told Livemint: “Some kind of rebound in gold prices is still in place.
“However, the impact of monetary policy changes like rising US interest rates will be felt gradually and the quick rebound in gold price should be finished.”
The regional presidents of the Fed are due to speak about the US’s economic prospects this week and its chair Janet Yellen will be giving her views in a webcast on Thursday (January 12).
Chicago Federal Reserve President Charles Evans has already said it’s possible that rates could be raised three times during 2017. That would mark a quicker schedule of increased borrowing costs than the markets were expecting in late 2016.
At 09:30 today (Monday January 9), gold was valued at £969.61 per troy ounce, up from last week’s highs that hovered around the £950 mark. Bullion prices are currently around five per cent higher than they were in mid-December, when the precious metal shed value after a strong year.
The current high prices could mark a good time to sell if you have built up your investment over the last few years. Conversely, if you’re seeking to start a gold investment, it’s worth watching the market’s reactions to this week’s forthcoming announcements on interest rates in the US which could see bullion drop in price.
“As long as the US economic data is good, people are expecting rate hikes to be more hawkish,” said Mr To.
The inauguration of President Elect Donald Trump later this month is also expected to bring waves to the gold market, making January an interesting month for traders.
Monday, January 2, 2017
The gold price finished 2016 8.6 per cent higher than it started, the first time it has increased on an annual basis for three years.
It’s been a mixed year for bullion; most of the precious metal’s gains came in the first half of the year and the gold price actually ended 2016 16 per cent down on the highs achieved in July. The price was boosted by the UK’s vote to leave the European Union in June, but the victory of Donald Trump in the US presidential elections sent bullion’s value in the opposite direction.
Analysts say the behaviour of investors defied conventional wisdom, and while the gold price did benefit from savvy buyers looking for a safe haven for their money during some of the more turbulent points in the year, the picture has been difficult to predict. Monetary easing by central banks and negative interest rates, as well as political events, created an environment in which it wasn’t always easy to identify in which direction the gold price would go.
The market is expecting a similarly hard to forecast picture over the next 12 months, although there is a strong expectation that the US Federal Reserve will raise interest rates which usually signals a retreat from gold.
Bob Haberkorn, a broker at RJO Futures, told the Wall Street Journal: “Any talk of rate increases is tough for gold. If you have people expecting three or four increases, that’s enough to keep the pressure on all year.”
However, other analysts believe bullion could enjoy another year of gains thanks to the uncertainty posed by elections in 2017 in Germany, France and the Netherlands. Plus, UBS Wealth Management forecasts that the shrinking gap between US growth and other countries will see the value of the dollar fall and the price of gold rise. It’s certainly shaping up to be an interesting year for gold bullion investors.