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The gold price has dropped to a nine-month low as the US dollar strengthens.
Ever since the election on November 8, the gold price has been between a rock and a hard place. Instead of surging towards $1,400 an ounce–like many predicted would happen with Donald Trump elected as president–it’s gone in the complete opposite direction.
As of 5:34 p.m. EST on Thursday (November 24), the gold price was $1,183.90 per ounce–its lowest level since February. The Economic Calendar noted that strong US goods data hasn’t helped the yellow metal, even though it’s been dropping off for some time already.
Since the election itself, Reuters points out that the price has dropped almost 12 percent from its $1,337.40 high.
Julius Baer analyst Carsten Menke the publication that, “The expectation that Trump’s election would lead to a longer risk-off period in financial markets was soon overtaken by the perception that he would be able to boost growth and that inflation would be accompanied by rising interest rates, which raised a bearish scenario for gold.”
What’s more, the US data released on Wednesday appears to be a strong indication the Federal Reserve will rase interest rates at their next meeting in December. The Financial Post noted that gold is marching toward its second monthly decline.
In an interview with the Financial Post, George Gero, managing director of RBC Wealth Management, said that a long-term infationary environment will drive investors into safe-haven assets, like gold.
“The basics longer term are going to be probably friendly to gold because we’re going to see inflation with a strong dollar, with higher interest rates and weak currencies elsewhere around the globe all of which means that people will be looking for a portable liquid and convertible into any currency option such as gold,” he said in the article.
On the other hand, however, David Govett, head of precious metals at Marex Spectrum said in a research note that the “precious complex” will have difficulties recovering while the US dollar remains strong.
Still–all hope is not lost for the precious metal. Even though it’s currently riding a near nine-month low, the panel in FocusEconomics‘ November 2016 Consensus Forecast Commodities report sees the gold price averaging $1,310 per ounce in the fourth quarter of 2016.
With demand coming from India–the second large consumer of gold in the world–will lead the way to higher gold prices, the report suggests. Looking ahead to 2017, the panel expects to hold steady around $1,315 per ounce in the final quarter of the year.
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Securities Disclosure: I, Jocelyn Aspa, hold no direct investment interest in any company mentioned in this article.
