Price Of Gold Shows More Signs Of Life Than Markets Expect

Wednesday, January 11, 2017

fine gold

As recently as last week, the price of gold was expected to have hit an upper limit, with some pessimism in the works for the first quarter of 2017. Today, there’s more optimism in the field, with gold looking back up toward $1,200 rather than down at $1,100.

What’s behind these signs of life in the gold markets, and where might those point gold in the future? There are a lot of opinions out there—and plenty of news stories to sift through—that provide clues into the current state of the price of gold:

Britain Following Through On Brexit?

Anyone watching the news—and how it affected the markets—last year noticed how much gold went up after the infamous Brexit vote shook investor confidence. Now, with David Cameron’s successor, PM Theresa May, giving indications that Brexit might turn out after all, it’s brought back some of those feelings to the markets.

This has triggered some safe-haven buying, according to at least one expert. A term like “safe-haven buying” is up to interpretation, but typically means buying up assets that are seen as a way to get out of the stock markets while keeping a segment of investor wealth. Gold and silver certainly qualify, which is perhaps why there has been some increased demand in the precious metal sector.

Prospects Of Another Interest Rate Increase May Limit Gold’s Optimism

While there’s enough lack of confidence out there to move some people to buy gold as a hedge, there’s also enough confidence in the markets to convince the Federal Reserve to consider increased limits. In fact, even the most recent rise in interest rates has some gold investors or at least market experts believing that any short-term optimism in the price of gold will indeed be short-term.

The article at The Economic Times quotes Mark To, the research head at Wing Fung Financial Group, as saying “Some kind of rebound in gold prices is still in place.” That optimism, at least in precious metals, coincides with the hedge buying we saw after new Brexit concerns.

All Things Considered, Gold Moves Near One-Month High

What is the result of all of this news and shift in investor concerns? Earlier this week, gold made its move closer to a one-month high. Last week’s 2% bump in the price of gold helped put it in that position. It might not seem like a major move to most investors—many of whom are watching for stocks to move close to the psychological 20,000-point mark in the Dow Jones Industrial Average—but it’s steadying news to those looking for optimism in the price of gold.

While the economy is showing enough signs of life to convince the Federal Reserve that there’s enough confidence for higher interest rates—typically a move that can hurt gold—not all investors believe that the projection of three interest rate hikes will come in 2017. And with that mixed confidence, investments like gold and silver tend to do well. We’re seeing that early in January as 2017 opens.

Darren Capriotti

Darren Capriotti has been a market analyst for the past decade and is an expert in precious metals. He prides himself on his ability to analyze the market and offer true value to investors with questions about gold, silver, and other precious metals. Highly educated, incredibly passionate, and more accurate than most, Darren offers a true, unbiased look into what investors can expect in the precious metals market. You can reach Darren at dcapriotti@gold-eagle.com.