Leading into the US presidential elections on November 8, 2016, gold was one of the star performers. True, the precious metal racked up gains of well under 20% over the past 1 year, but midway through 2016 gold was up 25%. Overall though, gold managed to eke out just 9% gains through from January 1, 2016 – December 31, 2016. It is clear from the performance trends that volatility and geopolitical uncertainty generate significant price movement with gold.
The Brexit is a case in point. The global community expected massive economic instability post-Brexit, and gold reacted accordingly. Over the past 30 days, gold has made gains of just 4.27%, up $48.70 per ounce. Its performance over 1 year is discouraging at just +6.45%. The momentum driving gold in 2016 appears to have abated, and this is evident in the current price trends of the precious metal.
What Short-Term Price Movements Are Likely with Gold?
On Friday, 27 January 2017, we saw the gold price recover and then retreat after hitting a 2-week low. Fueling the changes to the gold price was the USD. The greenback held its own against weaker than expected US GDP growth, and maintained its bullish momentum. Year on year, GDP growth increased by 1.9% in Q4 2016, according to data provided by the BEA (Bureau of Economic Analysis).
In Q3 2016, Wall Street analysts forecast a GDP growth rate of 3.5%. As soon as the news was released, the price of gold increased by $5, but quickly retreated to $1,181 per ounce. On Monday, January 23, 2017, gold was trading at 2-month highs, but there is firm resistance with the precious metal at around $1,220.20 per ounce.
For those interested in technical levels, the 38.2% Fibonacci retracement level is $1,220. It is gold’s inability to breach this resistance level that has many currency analysts believing that this is a key level.
How Does Holy Matrimony Boost Gold Price?
Over the short-term, the closure of Asian markets had a strong impact on gold demand. The Chinese celebrated their Lunar New Year and all markets across Asia were closed on Friday, 27 January through Sunday, 29 January. Short-sellers made quick work of gold by cashing in on the precious metal. The combination of 3 key factors is helping to drive gold prices lower, including a stronger USD, increased interest in equities and rising bond yields. Already, the Dow Jones industrial average is above 20,000 (it broke this barrier on Wednesday, 25 January), and momentum is clearly bullish.
