Gold is starting the new year on the right foot, continuing the surge that it was already experiencing at the end of 2017.
Going into 2018, we should expect gold prices to continue increasing and continue its already strong streak from 2017. Gold’s run in 2017 comes as a surprise because U.S. stock markets were at a high and the Federal Reserve increased interest rates three times. Despite this, gold still headed up.
We could see the same thing happening in 2018, especially if the U.S. dollar continues weakening, which will help in boosting gold. Gold increased more than 13% in 2017 because of the weakening dollar.
Not to mention, the decrease of the dollar gives more incentive for overseas buyers. The falling dollar makes gold and other dollar-denominated commodities cheaper for overseas buyers.
These same patterns will be continuing into 2018, especially if crude oil prices continue going up. Gold and oil have a historical tendency to have a flourishing relationship. Gold prices tend to go up based on the strength of the oil market. If the oil market is thriving, then gold is also thriving.
Mitsubishi analyst Jonathan Butler had this to say about this gold streak: “Gold starts 2018 at the highest level since September and the highest January opening since 2013. It is only the fourth time ever that gold has opened the year above $1,300.”
Gold has already hit a high that it hasn’t seen in five years.
Like I mentioned earlier, the U.S. dollar index has been in a recent decline. The dollar hit a three-month low last Friday. And on top of global political uncertainties, investors are doing some safe-haven buying…
Uncertainties Raise Gold Prices
Political uncertainties are looming. Every day is a new day, and it seems like there isn’t much certainty of what will happen in politics in 2018.
This is especially true when you have U.S. President Donald Trump tweeting North Korean leader Kim Jong Un on Monday, January 2nd, saying: “Will someone from his depleted and food starved regime please inform him that I too have a Nuclear Button, but it is a much bigger & more powerful one than his, and my Button works!”
Naturally, this will keep the entire world on edge, wondering what will happen next between these two leaders.
The U.S. president is taunting North Korea’s leader about who has more nuclear power. There’s no way that any good can come from this interaction.
This political uncertainty has investors scrambling for some kind of stability. It’s better to be safe rather than sorry, and who knows what might happen because of this hostility between the two leaders?
The fact that this open threat involving nuclear power was made by a president is astonishing. The involvement of nuclear power and nuclear war has always been a private one with past presidents — they didn’t want to scare U.S. citizens and the rest of the world.
This type of political uncertainty will have investors clamoring for gold. And that demand will result in soaring gold prices…
Gold’s 2018 Outlook
The outlook for gold in 2018 has the potential to be a bright one that could hit some new record highs.
Mark To, head of research at Hong Kong’s Wing Fung Financial Group, had this to say about gold’s outlook:
At this moment we are expecting some kind of inflationary expectations. People are more optimistic with stock rally are also expecting returns in commodities including gold.
We should tap the short term opportunities to go long as gold has crossed $1,300 with momentum… We might reach $1,400 in the first quarter this year.
As far as the beginning of 2018 goes, it seems like gold could rally toward $1,400. If we continue experiencing political uncertainty and the falling dollar, gold should continue soaring higher.
Until next time,
Jennifer Clark
Pro Trader Today