In order to ensure more accurate forecasts for gold prices this year, experts highlight to consider the following factors:
Factor nº1 – The real importance of interest rates
It hasn't been proven that gold is directly dependent on interest rates. In fact, when interest rates have been kept at zero, gold prices have shown fluctuation. Many more examples like this can be found along the history of gold prices and interest rates.
However, it is obvious that the Federal Reserve has a huge impact on the world's economy. If not dependent 100% as many might believe, it is important to watch the context of interest rates. The current ones are far below the rates of crises of the past. This means that, even if the three predicted rises in interest rates become a reality in 2017, the level of interest rates will not reach the one they had from 2008 back.
Factor nº2 – Demand for gold
This year will present a definitely higher gold demand. What is surprising is that the demand comes from central banks, which are acquiring more gold than they normally do. Why? Because they are seeking to stabilize themselves from what is happening in the market.
This demand, though, will not be high enough to trigger gold prices, but experts recommend to keep an eye on it throughout the year.
Factor nº3 – Decisive confidence
Curiously enough, what the average investor owns can make prices go up and down. These days, people are buying a lot into the stock market, and their confidence keep prices high as well as demand.
Forecasts makers should take this into account without forgetting that, the same way the investor's confidence can push the market higher, it can easily do the opposite too.
Factor nº4 – Market unpredictability: need for financial protection
People resorted to gold in 2016 due to their concerns about Brexit and the global economy. To this date, it is clear that gold still remains a financial hedge in times of market unpredictability. The need for financial protection will also be key for gold prices.
Do you seek financial protection too?