Gold ended the year 2015 at lows of $1,058 not seen since 2010. Gold had been on a downtrend ever since 2012, and 2015 was gold’s 3rd year in a downtrend. The US dollar and US assets were looking very attractive, so investors turned toward them while dumping their gold. This has created lots of demand for the online FX trading account, here you can check their deeper reviews and ratings. The US dollar and gold prices are negatively correlated, whereby gold loses value when the US economy is booming, which is what was happening from 2012 to 2015. Moreover, all investors turn to gold in such times because gold doesn’t earn any interest compared to other assets.
However, from the beginning of January 2016, fears over the economic slowdown in China brought back the appeal of gold. China’s manufacturing sector had shrunk all through 2015 according to the PMI reports, and there were fears of an economic slowdown. In such times, gold becomes the safest asset to own. Furthermore, that month was terrible for the stock market due to the same situation in China, and even more investors who had previously invested in stocks turned to gold. There was also fear on the political after North Korea detonated a hydrogen bomb and tension between Middle East nations.
All these caused the initial rally of gold in the first quarter of 2016 to highs of $1,300. There was a lot of resistance around the $1,214 range where the price went sideways, but it eventually broke through this resistance level turning it into a support. From there was the eventual rally to the $1,300 high which was briefly tested before prices plunged back down to the 38.2% Fibonacci level, the support level. Then it eventually made its way back to the $1,300 highs after fears of the Brexit vote later that month.
Demand for gold rose because investors were worried about the UK leaving the EU and causing uncertainty. A few days prior to the vote, polls showed the vote’s passing as unlikely, and European investors dumped their gold once again in favour of the soaring European assets. Those hopes quickly disappeared when the ‘Yes’ team won the vote and there was a scramble for gold which propelled its value past the $1,300 resistance to $1,375 in a matter of days.
It didn’t stay up there for long and prices started to dip gradually up until the Federal Reserve commented about possible rate hikes. These strengthened the US dollar and caused a drastic drop in gold in October 2016. After attempting to break the $1,300 resistance level upwards again, gold was pummelled by Trump’s election. This historic election strengthened the US dollars and US assets greatly and gold prices took a dive below $1,130.
It was only at the beginning of 2017 that gold finally came back up for air after unfavourable US bond yields were reported. Gold prices crawled back up to the $1,200 resistance level where there has been a lot of resistance. As the US dollar continues to weaken due to Trump’s policies and actions/statements, gold may be in for another uptrend for the near future. Throughout 2017, though, we expect to see the US dollar strengthen further after the FED increases interest rates, so this might not be the best year for gold.
