9.3
8.064 reviews
English
EN
The year 2016 could be described as the year in which the downward trend for gold was broken. The combination of falling stock prices and the threat of long-term low or even negative interest rates sparked a flight to precious metals. Halfway through the year, the gold price was almost 23% higher, while silver even shot up by 37% in the first six months of this year. This made the first half of 2016 the Best half year for gold since 1974.
However, the precious metals were unable to maintain this upward trend, as gold and silver took a step back in the second half of the year. With a gold price of just over €35,100 per kilogram at the time of writing, we arrive at an annual return of 11.5%. Silver did a lot better this year, as the current price of around €490 per kilogram translates to an annual return of 19%.
The sudden rise in the price of gold at the beginning of this year came as a surprise to many analysts. Georgette Boele of ABN Amro Increased Suddenly, her price target for gold went from $900 to $1,300 per troy ounce and said in a note at the time that the trend for the gold market had fundamentally reversed. Not much later, Goldman Sachs and Société Générale also withdrew their negative price targets for gold.
Within six months, negative sentiment among analysts gave way to growing optimism. ABN Amro raised its price target again to $1,370 per troy ounce, while JP Morgan expected a price of $1,400 per troy ounce for this year. According to Credit Suisse and HSBC even the $1,500 was within reach.
These price targets were all missed as well, as the following chart shows. The gold price peaked at $1,365 per troy ounce last summer, only to fall to less than $1,150 per troy ounce in recent months. In 2016, analysts from the various banks also showed more Trend Followers than to be trend spotters...
Gold price in 2016 in dollars per troy ounce
In 2016, gold was attractive not only because of extremely low interest rates, but also because of increasing political uncertainty. Whether it was Brexit, the U.S. presidential election, or the Italian referendum, they all gave a measurable and significant boost to the gold market. Bee Hollandgold Significantly more gold was traded than usual around these events. During the Italian referendum, the precious metal was even Not to be dragged. Apparently, more and more investors and savers see the value of the precious metal as a hedge against political risk.
Political risk is expected to continue to have an impact on the gold market in 2017. With elections in Italy, France, Germany, and the Netherlands, the political landscape could change significantly. In several countries, we see the rise of populist parties, which are able to attract many voters with critical positions on the European Union and the euro. More uncertainty about future European cooperation and monetary policy could boost demand for gold next year.
In the first half of this year, the gold price benefited from extremely low interest rates and volatility in the stock market. But towards the end of this year, the precious metal faced more headwinds due to a sudden rise in interest rates and a flight towards the dollar. In recent months, investors have favored stocks, especially those denominated in dollars. U.S. stock markets hit new all-time highs this year, and the Dow Jones index came close to 20,000 points several times. Safe-haven assets such as gold and government bonds were sold off towards the end of the year.
A rising dollar and higher interest rates have historically been unfavorable for gold. That is why it is important to reduce the interest rate on U.S. 10-year bonds and the Dollar index to keep a close eye on in 2017. According to trend watcher Martin Armstrong, a sustained flight to the dollar is unfavorable for the gold price and positive for the U.S. stock market. What that means for the gold price in euros also depends on the exchange rate between the euro and the dollar.
Rising dollar put pressure on gold prices at the end of 2016 (Chart via Macro trends)
In 2016, central banks will continue to expand their gold reserves. In the first nine months of this year, they bought a total of 271 tonnes of gold, according to figures from the World Gold Council. As a result, central banks have been buying more gold for eight years in a row, the Longest streak of gold purchases in almost fifty years. Russia and China were once again the main buyers in the global gold market. Russia Bought In the first eleven months, almost 200 tonnes of gold, comparable to last year.
Central banks want to reduce their currency risk and are therefore still adding precious metals to their reserves. According to the OMFIF Gold will even make a comeback as a monetary reserve in the future. Central banks are trying to anticipate this by expanding their gold reserves and bringing more precious metals back to their own countries. In 2014, the Dutch Central Bank (DNB) withdrew 20% of its gold reserves from its own country and in the past two years the German Bundesbank has already collected a total of more than 400 tonnes of gold Recalled from Paris and New York.
Central banks continue to buy gold (Chart via Bloomberg)
This year, investors finally got confirmation of what they had been thinking for years, namely that the price of gold and the price of silver would continue to rise for years. were manipulated on a large scale. Years ago, aggrieved investors filed a lawsuit against a number of banks that were involved in the daily fixing of the gold price and the silver price.
In October, investors were finally vindicated. Deutsche Bank was fined $38 million for manipulating the price of silver. In December, this was fined $60 million manipulation of the price of gold. The evidence showed that traders from different banks were in contact with each other and that they manipulated the fixing in a coordinated manner.
This scandal is similar to previous scandals involving the manipulation of interest rates and the foreign exchange market, but in 2016 we are no longer surprised. Investors and savers who live in Buy gold know that they must have physical possession of it, with no counterparty risk from a bank or a broker.
Fixing gold price and silver price was manipulated on a large scale
Gold and silver have shown excellent returns in 2016, despite the correction of recent months. What the price of gold will do next year is hard to say, as the price depends on numerous factors. A rising dollar and higher interest rates could put pressure on gold prices next year, while increasing political and geopolitical uncertainty could trigger a flight to gold.
This contribution comes from Market update
