Markets cautious on gold prospects

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A good month for gold has left the precious metal ending the year on the up, after a month of near-continuous growth has it gaining ground on its year-high of $1,357 set in September. A challenging last quarter for major currencies including the US Dollar, Euro and crypto-currencies such as Bitcoin, has sent investors to gold as a familiar safe haven. However, financial spread betting firms IG and City Index have sounded a note of caution, warning that key hurdles must be crossed before a positive outlook can be predicted.

After a disappointing early December, gold has managed a sustained period of growth throughout the second half of the month, with prices approaching the significant $1,300 barrier at the year’s end. With a disappointing programme of interest rate rises hitting the US dollar and a volatile period of peaks and troughs in Bitcoin’s value, as security breaches and fears of a bubble sent investors fleeing, gold has reaped the benefits.

However, as City Index have noted, December is a typically difficult time for gold – with major lows experienced by the commodity in 2016 and 2015. IG have identified this as a ‘make-or-break’ time for gold, as sustained pushes above £1,300 could spark a rally, while a more restrained January could equally see falls.

Where the markets have identified a potential win for gold in 2018 is in its familiar role as a ‘safe haven’, as potential difficulties in the world’s major currencies could attract investors. A difficult quarter of Brexit negotiations, combined with a rise in oil prices, could damage the Euro. Likewise, a reverse of this situation could push the Euro up against the US Dollar, sending investors towards gold as an alternative.

Kitco News has identified crypto-currencies as a major variable in this situation that could potentially provide a major boost for the price of gold. The precious metal has been a traditional beneficiary of uncertainty in the Bitcoin market, and any move to further regulate crypto-currencies could send investors rallying behind gold for safety. The more optimistic predictions from Incrementum AG see gold hitting $1,500 in 2018, whilst a pessimistic outlook from ForexLive has gold finishing Q2 at $1,050 after higher interest rates have had their effect.

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