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Can gold maintain 2016ís spectacular gains in 2017?

Monday, October 31, 2016

Investors and analysts are now looking ahead to 2017 and asking whether gold will continue with the spectacular gains it has made in 2016.

Sentiment appears to be against the likelihood of a similar year for the precious metal as we’ve seen in 2016, when the price has soared by around 20 per cent. That’s one of gold’s best performances since 1980.

The uncertainties that have pushed up the price of bullion are expected to ease. The dollar is gaining in strength as a result of the weakness of the pound following the UK’s Brexit vote; the US Federal Reserve is now widely forecast to increase US interest rates in December; and Hillary Clinton is pulling ahead of Donald Trump, albeit narrowly, in the race for the White House.

But over the longer term, the yellow metal still has plenty of lustre to attract investors. Although the economic picture may be brightening in the US and the political uncertainty that has dogged the country during this presidential election year appears to be easing, that is not the case everywhere. Globally, many countries are still implementing monetary easing policies leading to a weakening of their currencies. In addition, a number of developed countries’ interest rates are in negative territory. These issues all add to gold’s attraction as a safe haven investment over the longer term.

There is also the factor of fashion. According to the Hindu Business Line, “gold as an investment is back in vogue with surge in demand for gold ETFs (exchanged traded funds), bars and coins. If prices rally, investment demand will only rise further, taking prices higher”.

So, although bullion may not rise at the rapid rate it has done so far this year, gold appears likely to remain an important investment option in the months ahead. But always remember, the gold price can fall as well as increase, and watching the market carefully should be a key part of your investment strategy.