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.
