Gold up 21 percent since the start of 2016
Gold reacts to key US economic indicators
Gold closely linked to monetary policy
Weak Chinese / global growth in the first quarter increased gold
Geopolitical risks and the US presidential election important factors in the price movement
XAU / USD - 2016 Review and Forecast
Gold (XAU / USD) has accumulated impressive gains of 21 percent in the first half of 2016. Gold may be hard-pressed to repeat this feat in the next six months, but the outlook for gold remains positive, with the trade expected metal in the range of $ 1300- $ 1400 a year end.
At the beginning of 2016, gold traded at $ 1060, and has not looked back since. Global growth was hit in the first quarter of the year, as China reported a milder growth and therefore weaker demand. This resulted in a weaker first quarter growth in developed economies, particularly the US, the eurozone and Japan. Global markets plunged, and investors flocked to gold Alarmed, which provides a safe haven from market turbulence and volatility. Gold prices rose sharply in the first quarter of 2016, up near the level of $ 1,300 March. Gold is also closely linked to market sentiment regarding interest rate policy. Speculation that the Federal Reserve may raise interest rates pushed prices higher gold, but the metal was reduced whenever expectations of a rate hike retreated.
Open: $ 1,061.12 (January 1)
High: $ 1,374.79 (July 10)
Low: $ 1,060.54 (January 1)
Close: $ 1,335.97 (August 8)
Expectations Gold for June-December 2016
Economic Indicators US
key US indicators can have a strong impact on currency markets and commodities. Gold is no exception, as economic publications, missing expectations tend to cause uncertainty about the strength of the economy and often result in gold prices moving higher. By contrast, strong economic data may lead investors feel risk assets more convenient shopping, at the expense of gold, a traditional safe haven asset. key releases such as GDP, nonagricultural employment and CPI can have a strong impact on the movement of gold. The US economy softened in the first quarter, and this boosted gold prices. If the main economic indicators show a strong improvement, gold prices could soften.
US monetary policy
For nearly a decade, the US Federal Reserve kept rates near zero. However, that trend ended in December 2015, when the Fed raised the benchmark rate to 0.25%. Gold prices are closely linked to interest rates moves. A rise in interest rates makes the dollar more attractive to Gold Coast, which offers no interest. Conversely, a fall in the rate is bullish for gold. The first half of 2016 has been marked by ongoing speculation over whether the Federal Reserve will raise rates. Statements by Fed Chairman Janet Yellen and other Fed officials are closely watched by the markets. Statements that are hardliners and allusion to a rise in interest rates often push gold lower, while moderate messages from the Fed often increase gold prices. In December, the Fed hinted that it could raise rates three or four times the rate of this year, however, we are here in June, mid-year, no rate hikes so far in 2016. The most likely dates for the next hike is in July or September, but the Fed is unlikely to make a move if the employment indicators and inflation show no signs of improvement. Given that the Fed is willing to not surprise the markets with a rate hike, and any movement is likely to be increases of a quarter point only, gold response to a rate hike could be limited.
China
China is the world's second largest economy and a key trading partner for the US, Japan and the euro zone. The Chinese economy has contracted for six years and a sharp slowdown in the first quarter of 2o16 had serious repercussions on global markets, as lower Chinese demand negatively affected the developed economies, particularly the manufacturing and export. In a June report, the OECD has forecast that China's economy will grow 6.5% in 2016 and fall to 6.2% in 2017. China's growth will remain weak clouding the global economic outlook, and could signal more gains for gold.
world growth
Global growth was hit in the first quarter as the slowdown in China and developing economies hurt economies around the world. The global economy remains fragile, and the World Bank has lowered its forecast for global economic growth. Last week, the agency revised its growth forecast of 2.4 percent in 2016, compared with a profit of 2.9 percent is projected in January. The developed economies such as the euro area and Japan are facing weak growth and low inflation, while developing economies have been affected by the low prices of raw materials such as oil. weak global growth could be a boon for gold as safe haven assets continues to attract investors who have little appetite for risk in these uncertain economic conditions.
Geopolitical tensions
Geopolitical considerations play an important role in the price of raw materials such as gold. In times of uncertainty or crisis, investors often respond by dumping high-risk assets (such as minor currencies) and buying gold a safe haven asset. There is no shortage of potential shocks in the geopolitical sphere. Tensions continue between China and the US on claims of sovereignty by China in the South Pacific. Russia and Europe are at odds over the annexation of parts of Ukraine by Russia, and the ongoing war with ISIS in Iraq and Syria is another hot spot. In turn, referenda and elections worldwide add uncertainty and volatility in global markets. Notable events include the upcoming British referendum on EU membership and the US presidential election in November, which could lead to major changes in US policy as the Obama years come to an end. At the same time, one must remember that more often than not, the markets respond to such events with volatility for only a short period; this can create opportunities for traders, butgeopolitical events are unlikely to have a lasting effect on gold prices, you can nail or decrease after a particular event, only to return to previous levels.
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