Gold Set to Continue Gains in 2017 as U.S. Data Keeps Prices High
Gold Set to Continue Gains in 2017
Precious metals have made tremendous moves this year, and gold is set to continue its gains in 2017. Even if the Federal Reserve decides to hike rates in December, the conditions are set to be favorable to gold.
Gold prices have rallied over 19% this year. Global economic slowdown, low and negative rates around the world, Brexit fear, and future uncertainty are driving safe haven demand. Strategist and investor Mark Mobius predicts gold will climb over $1,370 in 2017 even with a Federal Reserve rate hike. Rate hikes tend to decrease demand for gold, but in the long run, in his assessment, it will weaken the dollar, which would make gold more attractive. The London Bullion Market Association had their annual meeting this week as well, and participants predicted gold to hit $1,347 next year.
Another condition that will drive the price of gold is the fact that there is currently a market surplus of physical gold. Global gold supply just experienced its largest quarterly surplus since the last quarter of 2005. A report by Reuters estimated that with such an oversupply of the metal, it is unlikely the price will fall below $1,240 and could go high enough to average $1400.
What this means for investors: An oversupply of anything will keep prices low for a time. When demand increases to match the supply, however, the price will eventually soar. It might not be an immediate move, but the market will adjust eventually. Investors should take advantage of price dips now.
Disappointing U.S. Domestic Data Keeps Gold High
Gold inched higher this week after a couple fairly quiet weeks. Prices remained positive this week despite little movement. U.S. durable goods order numbers for September were weaker than expected. Weakness in the manufacturing and transportation sector indicates a worrying slowdown in the economy.
The stock market and dollar are enjoying relative strength right now against the rest of the world’s major economies. It is a calm before the storm that is lacking in strong, economic fundamentals to underpin the strength we are seeing. The U.S. budget deficit is up 17% in the past year, $10 trillion in global government bonds are yielding negative returns, credit and stock market bubbles are expanding, and the U.S. is about to have an election between two of the most unpopular candidates in history.
What this means for investors: When these bubbles burst, gold and silver prices will soar. If the Federal Reserve decides to raise interest rates in December, this will likely give stocks and interest-bearing assets a boost for some time, but eventually markets will have to experience a massive correction. The warning signs are flashing now for many investors to start moving their money into safe haven gold and silver.
Gold Closes at 4 Week Highs Following FBI Probe on Clinton Emails
The markets received an unexpected shockwave on Friday afternoon when the FBI announced it was re-opening its investigation into Hilary Clinton’s email server scandal. During an investigation on former New York Congressman Anthony Weiner’s (former husband of top Clinton aide Huma Abedin) illicit text messages, emails were found on his phone that gave FBI director Comey reason to re-open the Clinton email investigation.
Gold jumped to its highest price in 4 weeks after the news broke early Friday afternoon. The markets pulled back slightly.
What this means for investors: Volatility and uncertainty are what gave gold its boost. As the frontrunner in the race, Clinton’s lack of judgment and mishandling of classified information raised fears about the prospect of her potential presidency.
The Current Case for Silver
Silver has been making a strong case all year with a stronger performance than gold for much of 2016. Silver has pulled back slightly in recent weeks along with gold. However, there is still a strong case to be made for the metal. Last week Deutsche Bank made the news for attempting price fixing on silver to manipulate the price to be lower. Although it is difficult to say just how much this affected overall prices. Silver prices are also influenced to a greater extent by industrial demand than gold prices are, which can make it move more sporadically. Silver ended the week in the green having been boosted by the same market forces as gold.
What this means for investors: This case for silver is still strong. Silver protects wealth and is cheaper to buy than gold, making it an ideal investment for a wider range of investors than gold. If gold rallies through the next year as strategists are predicting, silver will certainly ride the rally with it.
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Here are some articles from the web discussing the topics in this week’s post:
Gold Set to Continue Gains in 2017
Disappointing U.S. Domestic Data Keeps Gold High
Gold Closes at 4 Week High Following FBI Clinton Email Probe
The Current Case for Silver
As always, I encourage you to speak with your broker at RME for more market updates. Expert brokers are available Monday-Friday from 9 AM- 5 PM or by special appointment after hours. Call today at 602-955-6500 or toll-free at 877-354-4040.
