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Strong start to the week for gold Gold Bullion

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.